United States District Court, D. Nevada
before the court is plaintiff/counter-defendant Bank of
America, N.A.'s motion for summary judgment. (ECF No.
53). Defendant/counter-claimant SFR Investments Pool 1, LLC
(“SFR”) filed a response (ECF No. 62), as did
defendant Mesa Verde Homeowners Association (the
“HOA”) (ECF No. 64), to which the bank replied
(ECF No. 67).
before the court is the HOA's motion for summary
judgment. (ECF No. 54). The bank filed a response (ECF No.
60), to which the HOA replied (ECF No. 65).
before the court is SFR's motion for summary judgment.
(ECF No. 55). The bank filed a response, (ECF No. 59), to
which SFR replied (ECF No. 66).
present case involves a dispute over real property located at
3912 Thomas Patrick Avenue, North Las Vegas, Nevada (the
“property”). (ECF No. 4 at 3). Crystal Cole (the
“borrower”) purchased the property on March 3,
2008. (ECF No. 4 at 3). The borrower financed the purchase
with a Federal Housing Administration (“FHA”)
insured loan in the amount of $185, 179.00 loan that was
secured by a deed of trust dated, and recorded on, March 3,
2008. (ECF No. 4-1 at 11).
December 15, 2010, the HOA recorded a notice of delinquent
assessment lien through its trustee, Alessi & Koenig
(“A&K”). (ECF No. 4-5). The notice asserted
that the borrower owed $990.00 to the HOA. (ECF No. 4-5 at
April 20, 2011, the HOA recorded, through its trustee, a
notice of default and election to sell to satisfy the
delinquent assessment lien. (ECF No. 4-6). The notice
asserted that the borrower owed $2, 140.00 in fees. (ECF No.
4-6 at 2). On the same day as it was recorded, A&K mailed
the notice of default and election to sell to Mortgage
Electronic Registration Services (“MERS”). (ECF
No. 55-8). The bank received this notice on May 16, 2011.
(ECF No. 55-9 at 4).
28, 2011, the deed of trust was assigned to BAC Home Loans
Servicing, LP (“BAC”) FKA Countrywide Home Loans
Servicing, LP, via an assignment of deed of trust. (ECF No.
4-4). The assignment was recorded on July 6, 2011. (ECF No.
4-4). The bank obtained interest in the deed of trust as
successor in interest by merger to BAC. (ECF No. 4 at
29, 2013, A&K mailed a notice of trustee's sale (via
certified mail, return receipt requested) to the borrower,
the bank, and MERS. (ECF Nos. 55-11). On July 31, 2013, the
HOA recorded the notice of trustee's sale through its
agent. (ECF No. 4-7). The notice asserted that the borrower
owed $6, 767.30 and that the trustee's sale would occur
on August 28, 2013. (ECF No. 4-7 at 2).
held the trustee's sale on August 28, 2013, at which SFR
purchased the property for $10, 100.00. (ECF No. 4-10 at 2).
The foreclosure deed was recorded on September 9, 2013. (ECF
April 27, 2015, the bank filed an amended complaint,
asserting four claims against the HOA and SFR: (1)
declaratory relief/quiet title; (2) wrongful foreclosure
against the HOA; (3) breach of Nevada Revised Statute
(“NRS”) 116.1113 against the HOA; and (4)
injunctive relief against SFR. (ECF No. 4).
bank contends that the HOA's foreclosure sale did not
extinguish the senior deed of trust because (1) the FHA had
an interest in the deed and an extinguishment of the federal
government's interest would be in violation of the
Constitution, (2) the notices were insufficient under Nevada
law, (3) the HOA wrongfully rejected the bank's tender of
the super-priority amount, (4) the sale was commercially
unreasonable, and (5) Nevada's statutory scheme providing
superpriority liens to homeowners associations is violative
of procedural due process under the Constitution. (ECF No. 4
at 7-9). The bank also maintains that the HOA violated NRS
116.1113 by falsely promising that its liens were subordinate
to the senior deed of trust and thereafter failing to notify
the bank that its security interest was at risk. (ECF No. 4
2, 2015, SFR filed an answer and counter/cross-claim
asserting two claims of relief against the bank and the
borrower: (1) declaratory relief/quiet title; and (2)
preliminary and permanent injunction. (ECF No. 19).
Federal Rules of Civil Procedure allow summary judgment when
the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any,
show 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). 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).
purposes of summary judgment, disputed factual issues should
be construed in favor of the non-moving party. Lujan v.
Nat'l Wildlife Fed., 497 U.S. 871, 888 (1990).
However, to be entitled to a denial of summary judgment, the
non-moving party must “set forth specific facts showing
that there is a genuine issue for trial.” Id.
determining summary judgment, the court applies a
burden-shifting analysis. “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.” C.A.R. Transp. Brokerage Co. v. Darden
Rests., Inc., 213 F.3d 474, 480 (9th Cir. 2000).
Moreover, “[i]n 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.”
contrast, when the non-moving 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 non-moving party's case; or (2)
by demonstrating that the non-moving 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 non-moving party's evidence. See Adickes
v. S.H. Kress & Co., 398 U.S. 144, 159- 60 (1970).
moving party satisfies its initial burden, the burden then
shifts to the opposing party to establish that a genuine
issue of material fact exists. 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. Pac. Elec.
Contractors Ass'n, 809 F.2d 626, 630 (9th Cir.
Ninth Circuit has held that information contained in an
inadmissible form may still be considered for summary
judgment if the information itself would be admissible at
trial. Fraser v. Goodale, 342 F.3d 1032, 1036 (9th
Cir. 2003) (citing Block v. City of Los Angeles, 253
F.3d 410, 418-19 (9th Cir. 2001) (“To survive summary
judgment, a party does not necessarily have to produce
evidence in a form that would be admissible at trial, as long
as the party satisfies the requirements of Federal Rules of
Civil Procedure 56.”)). . . . . . . . . . . . . . . .
motion, SFR moves for summary judgment on its
cross/counterclaims for quiet title and preliminary and
permanent injunctions, (ECF No. 55), whereas the bank moves
for summary judgment on its claims for quiet title, wrongful
foreclosure, breach of NRS 116.1113, and injunctive relief,
(ECF No. 53).
Nevada law, “[a]n action may be brought by any person
against another who claims an estate or interest in real
property, adverse to the person bringing the action for the
purpose of determining such adverse claim.” Nev. Rev.
Stat. § 40.010. “A plea to quiet title does not
require any particular elements, but each party must plead
and prove his or her own claim to the property in question
and a plaintiff's right to relief therefore depends on
superiority of title.” Chapman v. Deutsche Bank
Nat'l Trust Co., 302 P.3d 1103, 1106 (Nev. 2013)
(citations and internal quotation marks omitted). Therefore,
for claimant to succeed on its quiet title action, it needs
to show that its claim to the property is superior to all
others. See Breliant v. Preferred Equities Corp.,
918 P.2d 314, 318 (Nev. 1996) (“In a quiet title
action, the burden of proof rests with the plaintiff to prove
good title in himself.”).
asserts that summary judgment in its favor is proper because,
inter alia, the foreclosure sale extinguished the
bank's deed of trust pursuant to NRS 116.3116 and SFR
Invs. Pool 1, LLC v. U.S. Bank, N.A., 334 P.3d 408,
412-14 (Nev. 2014) (“SFR Investments”)
and because the bank has not met the fraud, unfairness, or
oppression requirement to set aside a foreclosure sale as
outlined in Shadow Wood Homeowners Assoc. v. N.Y. Cmty.
Bancorp., Inc., 366 P.3d 1105, 1112 (Nev. 2016)
(“Shadow Wood”). (ECF No. 55). The HOA
echoes some of SFR's arguments in its motion for summary
judgment, asserting that summary judgment is appropriate as
to SFR's quiet title action. (ECF No. 54).
bank contends that summary judgment in its favor is proper
because, inter alia, (1) it tendered the
superpriority portion, but the HOA wrongfully refused the
tender; (2) the foreclosure sale was conducted contrary to
federal law, (3) the foreclosure sale was commercially
unreasonable, (4) the foreclosure sale is invalid because the
notice scheme of NRS Chapter 116 is facially
unconstitutional, and (5) SFR Investments should not
be applied retroactively. (ECF No. 53).
the Nevada Supreme Court has held that foreclosure of an HOA
superpriority lien under Chapter 116 will extinguish all
lower priority interests. See SFR Investments, 334
P.3d at 412-14. If this court finds a properly conducted
foreclosure sale, only through equity will the bank prevail.
However, “a court of equity acts with caution.”
Hurley v. Kincaid, 285 U.S. 95, 104 n.3 (1932).
Indeed, the court finds that exercising such caution is
warranted in this case.
Nev. Rev. Stat. § 116.3116
§ 116.3116(1) gives an HOA a lien on its homeowners'
residences for unpaid assessments and fines; moreover, NRS
116.3116(2) gives priority to that HOA lien over all other
liens and encumbrances with limited exceptions-such as
“[a] first security interest on the unit recorded
before the date on which the assessment sought to be enforced
became delinquent.” Nev. Rev. Stat. §
116.3116(2)(b). The statute then carves out a partial
exception to subparagraph (2)(b)'s exception for first
security interests. See Nev. Rev. Stat. §
116.3116(2). In SFR Investments, the Nevada Supreme
Court provided the following explanation:
As to first deeds of trust, NRS 116.3116(2) thus splits an
HOA lien into two pieces, a superpriority piece and a
subpriority piece. The superpriority piece, consisting of the
last nine months of unpaid HOA dues and maintenance and
nuisance-abatement charges, is “prior to” a first
deed of trust. The subpriority piece, consisting of all other
HOA fees or assessments, is subordinate to a first deed of
334 P.3d at 411 (Nev. 2014).
Chapter 116 permits an HOA to enforce its superpriority lien
by nonjudicial foreclosure sale. Id. at 415. Thus,
“NRS 116.3116(2) gives an HOA a true superpriority
lien, proper foreclosure of which will extinguish a first
deed of trust.” Id. at 419; see also
Nev. Rev. Stat. § 116.31162(1) (providing that
“the association may foreclose its lien by sale”
upon compliance with the statutory notice and timing rules).
bank argues that the HOA lien statute cannot interfere with
the federal mortgage insurance program or extinguish mortgage
interests insured by the FHA. (ECF No. 53 at 6-12).
single-family mortgage insurance program allows FHA to insure
private loans, expanding the availability of mortgages to
low-income individuals wishing to purchase homes. See
Sec'y of Hous. & Urban Dev. v. Sky Meadow
Ass'n, 117 F.Supp.2d 970, 980-81 (C.D. Cal. 2000)
(discussing program); Wash. & Sandhill Homeowners
Ass'n v. Bank of Am., N.A., No.
2:13-cv-01845-GMN-GWF, 2014 WL 4798565, at *1 n.2 (D. Nev.
Sept. 25, 2014) (same). If a borrower under this program
defaults, the lender may foreclose on the property, convey
title to HUD, and submit an ...