United States District Court, D. Nevada
ROBERT C. JONES, District Judge.
This case arises out of the foreclosure of a residential property by a homeowners association. Pending before the Court is a Motion for Summary Judgment (ECF No. 14). For the reasons given herein, the Court denies the motion and stays the case.
I. FACTS AND PROCEDURAL HISTORY
On or about June 7, 2005, non-parties Peter R. Castaneda, Tracy R. Castaneda, and Jose L. Castaneda ("Borrowers") gave lender Bank of America, N.A. ("BOA") a $265, 800 promissory note in exchange for proceeds in that amount to purchase real property at 3816 Purple Bloom Ct., Las Vegas, NV (the "Property"), as well as a first deed of trust against the Property. ( See Compl. ¶¶ 1, 4, 8, July 12, 2013, ECF No. 1). When Borrowers became delinquent on their HOA dues, Nevada Association Services, Inc., as agent for Sunrise Ridge Master HOA, recorded an HOA lien against the Property and conducted a foreclosure sale, at which Rob and Robbie, LLC ("R&R") obtained the property for $6000. ( See id. ¶¶ 11-12). Section 9.8 of the Covenants, Conditions, and Restrictions ("CC&R") relating to the Property state, inter alia, that "The lien of assessments, including interest and costs, shall be subordinate to the lien of any first Mortgage upon the Unit." ( Id. ¶ 14). The first mortgage is in default. ( Id. ¶ 15).
BOA sued R&R in this Court for declaratory relief that the HOA foreclosure did not extinguish the first mortgage, and to quiet title to that effect. Plaintiff has moved for offensive summary judgment. The Court has given Defendant additional time to respond, but the parties have now stipulated to stay the case given the Nevada Supreme Court's impending decision on the dispositive issue.
II. LEGAL STANDARDS
A court must grant summary judgment when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). Material facts are those which may affect the outcome of the case. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. See id. A principal purpose of summary judgment is "to isolate and dispose of factually unsupported claims." Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). In determining summary judgment, a court uses a burden-shifting scheme:
When the party moving for summary judgment would bear the burden of proof at trial, it must come forward with evidence which would entitle it to a directed verdict if the evidence went uncontroverted at trial. In such a case, the moving party has the initial burden of establishing the absence of a genuine issue of fact on each issue material to its case.
C.A.R. Transp. Brokerage Co. v. Darden Rests., Inc., 213 F.3d 474, 480 (9th Cir. 2000) (citations and internal quotation marks omitted). In contrast, when the nonmoving party bears the burden of proving the claim or defense, the moving party can meet its burden in two ways: (1) by presenting evidence to negate an essential element of the nonmoving party's case; or (2) by demonstrating that the nonmoving party failed to make a showing sufficient to establish an element essential to that party's case on which that party will bear the burden of proof at trial. See Celotex Corp., 477 U.S. at 323-24. If the moving party fails to meet its initial burden, summary judgment must be denied and the court need not consider the nonmoving party's evidence. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 159-60 (1970).
If the moving party meets its initial burden, the burden then shifts to the opposing party to establish a genuine issue of material fact. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). To establish the existence of a factual dispute, the opposing party need not establish a material issue of fact conclusively in its favor. It is sufficient that "the claimed factual dispute be shown to require a jury or judge to resolve the parties' differing versions of the truth at trial." T.W. Elec. Serv., Inc. v. P. Elec. Contractors Ass'n, 809 F.2d 626, 631 (9th Cir. 1987). In other words, the nonmoving party cannot avoid summary judgment by relying solely on conclusory allegations unsupported by facts. See Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 1989). Instead, the opposition must go beyond the assertions and allegations of the pleadings and set forth specific facts by producing competent evidence that shows a genuine issue for trial. See Fed.R.Civ.P. 56(e); Celotex Corp., 477 U.S. at 324.
At the summary judgment stage, a court's function is not to weigh the evidence and determine the truth, but to determine whether there is a genuine issue for trial. See Anderson, 477 U.S. at 249. The evidence of the nonmovant is "to be believed, and all justifiable inferences are to be drawn in his favor." Id. at 255. But if the evidence of the nonmoving party is merely colorable or is not significantly probative, summary judgment may be granted. See id. at 249-50.
The parties do not appear to dispute the allegations, as recounted, supra. The question before the Court therefore is a pure matter of law. This Court has opined before that the foreclosure of an HOA lien in Nevada does not extinguish a first mortgage recorded before the delinquencies giving rise to that HOA lien arose, which circumstances appear plain from the face of the FAC in this case. See generally Bayview Loan Servicing, LLC v. Alessi & Koenig, LLC, 962 F.Supp.2d 1222 (D. Nev. 2013). At least three other judges in this District have ruled similarly. See, e.g., Salvador v. Nat'l Default Servicing Corp., No. 2:13-cv-1011, 2013 WL 6019211 (D. Nev. Nov. 13, 2013) (Mahan, J.); Kal-Mor-USA, LLC v. Bank of America, N.A., No. 2:13-cv-0680, 2013 WL 3729849 (D. Nev. July 8, 2013) (George, J.); Diakonos Holdings, LLC v. Countrywide Home Loans, Inc., No. 2:12-cv-949, 2013 WL 531092 (D. Nev. Feb. 11, 2013) (Dawson, J.).
On the other hand, at least two other judges of this District have ruled to the contrary. See, e.g., 7912 Limbwood Court Trust v. Wells Fargo Bank, N.A., ___ F.Supp.2d ___, 2013 WL 5780793 (D. Nev. 2013) (Pro, J.); Cape Jasmine Court Trust v. Cent. Mortg. Co., No. 2:13-cv-1125, 2014 WL 1305015 (D. Nev. Mar. 31, 2014) (Gordon, J.). The opinions in those cases also represent reasonable interpretations of the law. Those courts essentially reasoned that because section 116.3116 explicitly makes part of an HOA lien "prior" (senior) to a first mortgage, the foreclosure of such a lien extinguishes the first mortgage by the plain text of the statute and the normal operation of foreclosure, i.e., that the foreclosure of a lien that is even partially senior to another lien extinguishes the latter lien. This Court has recognized that the above reasoning is generally sound but has ruled that in the present context the result would be to read the first-mortgage rule out of the statutes except in a class of cases that was rare when the statutes were adopted, i.e., the first-mortgage rule would only have any effect as to properties that were "underwater" (or nearly so). The Court ruled that this result was almost certainly not intended by the legislature. A split of opinion exists in the state district courts, as well. Because of this split of authority, another judge of this District has granted a preliminary injunction in a similar case in order to maintain the status quo in light of the "strong questions going to the merits." See Platinum Realty & Holdings, LLC v. Lee, No. 2:13-cv-535, 2014 WL 321133 (D. Nev. Jan. 28, 2014) (Navarro, C.J.). The Nevada Supreme Court has not yet opined on the issue, but it heard oral arguments on two cases implicating the issue on May 7, 2014. The State Bar of Nevada Real Property Section filed an amicus brief in the Nevada Supreme Court favoring Judges Pro's and Gordon's resolution of the issue. The Nevada Supreme Court's ruling may determine the issue or at least give a strong indication as to the ...