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Bank of New York Mellon v. Foreclosure Sales Services, LLC

United States District Court, D. Nevada

February 15, 2017

BANK OF NEW YORK MELLON, Plaintiff,
v.
FORECLOSURE SALES SERVICES, LLC and NV FORECLOSURE SERVICES, LLC, Defendants.

          ORDER (1) GRANTING MOTION TO SET ASIDE DEFAULT JUDGMENT, (2) GRANTING MOTION TO INTERVENE, AND (3) ORDERING THE PARTIES TO SHOW CAUSE WHY THIS CASE SHOULD NOT BE DISMISSED FOR LACK OF SUBJECT MATTER JURISDICTION (ECF NOS. 32, 33)

          ANDREW P. GORDON, UNITED STATES DISTRICT JUDGE

         Plaintiff Bank of New York Mellon (BONY) filed this suit against defendants Foreclosure Sales Services, LLC (FSS) and NV Foreclosure Services, LLC to quiet title in property located at 628 Bay Bridge Drive in North Las Vegas. ECF No. 1. I dismissed defendant NV Foreclosure Services without prejudice after BONY failed to provide proof of service. ECF No. 17. BONY obtained a default judgment against FSS. ECF No. 27.

         Nevada New Builds LLC moves to intervene in this action and to set aside the default judgment. ECF Nos. 32, 33. New Builds argues it owned the real property at the time BONY obtained its default judgment against FSS. New Builds contends BONY was aware of that fact at the time it sought the default judgment but did not inform the court of that information. New Builds argues that allowing the default judgment to stand would deprive it of its interest in the property without due process. New Builds thus requests leave to intervene and for the default judgment to be set aside.

         BONY opposes, arguing Nevada law precludes New Builds from intervening after default judgment has been entered. BONY also argues the motion to intervene is untimely because New Builds had reason to know its interests might be adversely affected by the outcome of this litigation as soon as it bought the property yet it did not seek to intervene until after default judgment was entered. BONY also argues the motion to intervene is procedurally improper because it does not set forth the claim or defense for which intervention is sought. As to the motion to set aside, BONY argues there was no fraud on the court to support setting aside the default judgment.

         I set aside the default judgment and grant the motion to intervene. I also direct the parties to show cause why this case should not be dismissed for lack of subject matter jurisdiction.

         I. BACKGROUND

         The property was purchased in 2005 by Alberto Cervantes. ECF No. 34-1. Cervantes borrowed $212, 000.00 from WMC Mortgage Corp., and the note was secured by a deed of trust encumbering the property. ECF No. 34-2. WMC assigned the deed of trust to BONY in 2011. ECF No. 34-3.

         In May 2010, the homeowners' association (HOA) recorded a notice of delinquent assessment after Cervantes failed to pay his HOA dues. ECF No. 34-4. The HOA foreclosed on its lien and FSS and NV Foreclosure Services bought the property at the September 2012 HOA foreclosure sale. ECF Nos. 34-5; 34-6; 34-7.

         On October 30, 2015, BONY filed this lawsuit against FSS and NV Foreclosure Services seeking to quiet title in the property. ECF No. 1. On November 6, 2015, BONY recorded a notice of lis pendens advising of the pendency of this action. ECF No. 34-9.

         In December 2015, FSS and NV Foreclosure Services quitclaimed their joint interest in the property to FSS. ECF No. 34-8. On January 15, 2016, FSS quitclaimed its interest in the property to New Builds. ECF No. 32-2 at 3-6. The quitclaim deed was recorded on June 14, 2016. ECF No. 32-2 at 2-3.

         FSS did not answer or otherwise respond to the complaint so BONY moved for entry of default. ECF No. 18. The clerk of court entered default on April 26, 2016. ECF No. 20.

         In July 2016, prior to BONY moving for a default judgment, New Builds' counsel contacted BONY's counsel. ECF No. 32-3. The parties exchanged emails in which New Builds provided the quitclaim deed showing New Builds owned the property and explored with BONY the possibility of setting aside the default or settling the matter. ECF Nos. 32-3 at 2-4; 32-4 at 2-4; 32-5 at 2-5. New Builds' counsel requested that BONY not take any action against FSS, "such as seeking a Default Judgment without letting me know in advance, " while the parties discussed settlement. ECF Nos. 32-4 at 4; 32-5 at 2.

         BONY nevertheless sought and obtained a default judgment against FSS in August 2016 without telling New Builds. ECF Nos. 25, 26. In doing so, BONY did not advise this court that FSS had quitclaimed its interest in the property to New Builds. See ECF No. 25.

         Settlement talks failed in early September 2016. ECF No. 32-6 at 3-4. New Builds then requested BONY stipulate to substitute New Builds into the case. Id. at 3. BONY declined to stipulate to the substitution. Id. at 2. Throughout these communications, BONY's counsel did not inform New Builds' counsel that BONY had obtained a default judgment against FSS. ECF No. 32-7 ...


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