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Bayview Loan Servicing LLC v. SFR Investments Pool 1 LLC

United States District Court, D. Nevada

March 22, 2017

BAYVIEW LOAN SERVICING, LLC, Plaintiffs,
v.
SFR INVESTMENTS POOL 1, LLC, et al., Defendants.

          ORDER

         Presently before the court is intervenor Bank of America, N.A.'s (“BANA”) motion for summary judgment (ECF No. 110) and counter/cross-claimant SFR Investments Pool 1, LLC's (“SFR”) motion for summary judgment (ECF No. 111). Corresponding responses have been filed by defendant Buena Vista Homeowners Association (“the HOA”), BANA, and SFR. (ECF Nos. 112-14).[1] Parties have filed replies. (ECF Nos. 115, 119).

         Also before the court is SFR's motion to certify a question of law to Nevada's Supreme Court. (ECF No. 127). BANA filed a response (ECF No. 130), and SFR filed a reply. (ECF No. 131).

         I. Introduction

         This case involves the non-judicial foreclosure of the real property at 7617 Amato Avenue, Las Vegas, Nevada (the “property”) based on a homeowners' association lien. Relevant to the instant analysis, on October 17, 2011, “Mortgage Electronic Registration Systems, Inc. . . . assigned its interest in the senior deed of trust to BANA via an assignment of deed of trust.” (ECF No. 110 at 4); see also (ECF No. 110-3).

         “BANA subsequently assigned the senior deed of trust to Bayview Loan Servicing, LLC ([“]Bayview[“]) via an assignment of deed of trust recorded on February 18, 2014.” (ECF No. 110 at 4). However, Bayview then reassigned the deed of trust back to BANA, and that transaction was recorded on August 31, 2015. (Id.).

         On April 5, 2011, the HOA acted through its trustee, Nevada Association Services, Inc. (“NAS”), to “record[] a notice of delinquent assessment lien against the property.” (Id.). On June 29, 2011, NAS recorded a notice of default on behalf of the HOA. (ECF No. 110-7). “On June 30, 2011, after Buena Vista recorded its notice of default, BANA requested the super priority amount of Buena Vista's lien from NAS.” (ECF No. 110 at 5).

         NAS responded by indicating an amount of $2, 900.25, but that value did not itemize the balance on the super-priority lien. (Id.). BANA calculated the super-priority amount for itself and attempted tender of $571.50. (Id.). However, NAS rejected that tender. (Id.).

         On December 12, 2011, NAS recorded a notice of foreclosure sale, and the underlying property was sold on August 10, 2012. (Id.). “SFR purchased the property at the sale for $7, 000.” (Id.).

         A complaint was filed by Bayview on November 7, 2014. (ECF No. 1). On March 13, 2015, SFR filed an answer to the complaint and asserted cross- and counterclaims for quiet title and injunctive relief. (ECF No. 41).

         On October 29, 2015, BANA filed a motion to intervene in this action, asserting the following: “BANA is the current beneficiary of the first-recorded deed of trust on the property . . . at issue in this case, by virtue of an assignment of deed of trust from plaintiff [Bayview] to BANA, dated August 24, 2015, ” that was recorded on August 31, 2015. (ECF No. 76 at 2). Magistrate Judge Foley granted that motion on November 25, 2015. (ECF No. 78).

         BANA subsequently answered SFR's counterclaim and cross-claim in intervention, asserting its own claims as follows: (1) a declaratory judgment against SFR, HOA, and NAS setting aside the foreclosure sale on constitutional and bankruptcy grounds; (2) breach of Nevada Revised Statute (“NRS”) 116.1113 against Buena Vista; (3) wrongful foreclosure against Buena Vista and NAS; (4) injunctive relief against SFR; and (5) unjust enrichment against NAS. (ECF No. 79).

         BANA's corresponding motion for summary judgment argues that its tender was sufficient to redeem its senior position; the foreclosure sale was commercially unreasonable; SFR is not a bona fide purchaser; SFR Investments Pool 1, LLC v. U.S. Bank, N.A., 334 P.3d 408 (2014), should not be applied retroactively; the state-law grounds for the foreclosure sale give way to federal interests; and NRS chapter 116 is facially unconstitutional. (ECF No. 110).

         SFR's motion for summary judgment asserts that the first deed of trust was extinguished by the non-judicial foreclosure sale; BANA should not enjoy an equitable remedy; title has vested with SFR for lack of evidence showing fraud, unfairness, or oppression; SFR is a bona fide purchaser; the original borrower's interest is extinguished; FHA insurance makes no difference in this case; and plaintiff's lis pendens on the property should be expunged. (ECF No. 111).

         II. Legal Standard

         The 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).

         For 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.

         In 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.” Id.

         By 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).

         If the 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. 1987).

         The 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.”)).

         III. Discussion

         a. SFR Investments' retroactivity

         As an initial matter, BANA argues in its motion for summary judgment that SFR Investments should not be applied retroactively. (ECF No. 110).

         The Nevada Supreme Court has since applied the SFR Investments holding in numerous cases that challenged pre-SFR Investments foreclosure sales. See, e.g., Centeno v. Mortg. Elec. Registration Sys., Inc., No. 64998, 2016 WL 3486378, at *2 (Nev. June 23, 2016); LN Mgmt. LLC Series 8301 Boseck 228 v. Wells Fargo Bank, N.A., No. 64495, 2016 WL 1109295, at *1 (Nev. Mar. 18, 2016) (reversing 2013 dismissal of quiet-title action that concluded contrary to SFR Investments, reasoning that “the district court's decision was based on an erroneous interpretation of the controlling law”); Mackensie Family, LLC v. Wells Fargo Bank, N.A., No. 65696, 2016 WL 315326, at *1 (Nev. Jan. 22, 2016) (reversing and remanding because “[t]he district court's conclusion of law contradicts our holding in SFR Investments Pool 1 v. U.S. Bank”). Thus, SFR Investments applies to this case. Accordingly, the court rejects BANA's argument as to this question.

         b. Constitutional validity of sale

         1. Supremacy clause

         Under the property clause of the United States Constitution, only “Congress shall have the power to dispose of and make all needful rules and regulations respecting the territory or other property belonging to the United States . . . .” U.S. Const. Art. IV, § 3, cl. 2. The supremacy clause provides that the “Constitution . . . shall be the supreme law of the land . . . .” U.S. Const. Art. VI, cl. 2. “State legislation must yield under the Supremacy Clause of the Constitution to the interests of the federal government when the legislation as applied interferes with the federal purpose or operates to impede or condition the implementation of federal policies and programs.” Rust v. Johnson, 597 F.2d 174, 179 (9th Cir. 1979).

         In Rust, the Ninth Circuit held that a city's foreclosure on property insured by the Federal National Mortgage Association was invalid under the supremacy clause. The court reasoned that upholding the sale “would run the risk of substantially impairing the Government's participation in the home mortgage market and of defeating the purpose of the National Housing Act.” Id.

         On this basis, courts consistently apply federal law, ignoring conflicting state law, when determining rights related to federally owned and insured loans. United States v. Stadium Apartments, Inc., 425 F.2d 358, 362 (9th Cir. 1970) (holding that federal law applies to mortgages insured by the Federal Housing Administration (“FHA”) “to assure the protection of the federal program against loss, state law to the contrary notwithstanding”); see also United States v. Victory Highway Vill., Inc., 662 F.2d 488, 497 (8th Cir. 1981) (citing Ninth Circuit case law) (“We note that federal law, not [state] law, governs the rights and liabilities of the parties in cases dealing with the remedies available upon default of a federally held or insured loan.”). Foreclosure on federal property is prohibited where it interferes with the statutory mission of a federal agency. See United States v. Lewis Cnty., 175 F.3d 671, 678 (9th Cir. 1999) (holding that the state could not foreclose on federal Farm Service Agency property for non-payment of taxes).

         Indeed, federal district courts in this circuit have set aside HOA foreclosure sales on supremacy clause grounds in cases involving federally insured loans. Saticoy Bay LLC, Series 7342 Tanglewood Park v. SRMOF II 2012-1 Trust, No. 2:13-cv-1199-JCM-VCF, 2015 WL 1990076, at *1 (D. Nev. Apr. 30, 2015); see also Sec'y of Hous. & Urban Dev. v. Sky Meadow Ass'n, 117 F.Supp.2d 970, 982 (C.D. Cal. 2000) (voiding HOA's non-judicial foreclosure on HUD property, quieting title in HUD's favor based on property and supremacy clauses); Yunis v. United States, 118 F.Supp.2d 1024, 1027, 1036 (C.D. Cal. 2000) (voiding HOA's non-judicial foreclosure sale of property purchased under veteran's association home loan guarantee program); Wash. & Sandhill Homeowners Ass'n v. Bank of Am., N.A., No. 2:13-cv-01845-GMN-GWF, 2014 WL 4798565, at *6 (D. Nev. Sept. 25, 2014) (holding that property and supremacy clauses barred foreclosure sale where mortgage interest was federally insured).

         The 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 Sky Meadow Ass'n, 117 F.Supp.2d at 980-81 (discussing program); Wash. & Sandhill Homeowners Ass'n, 2014 WL 4798565, at *1 n.2 (same). If a borrower under this program defaults, the lender may foreclose on the property, convey title to HUD, and submit an insurance claim. 24 C.F.R. 203.355. HUD's property disposition program generates funds to finance the program. See 24 C.F.R. § 291.1.

         However, the instant claims to quiet title are not directed at FHA. See (ECF Nos. 41, 79). Therefore, this court finds that plaintiff does not have standing to assert this claim under the supremacy clause. See, e.g., JPMorgan Chase Bank, N.A. v. SFR Investments Pool 1, LLC, 200 F.Supp.3d 1141, 1162-64 (D. Nev. 2016); Freedom Mortg. Corp. v. Las Vegas Dev. Grp., LLC, 106 F.Supp.3d 1174, 1177 (D. Nev. 2015); see also Bank of America, N.A. v. Hollow de Oro Homeowners Association, et al., No. 2:16-CV-675-JCM-VCF, 2017 WL 936633, at *3 (D. Nev. Mar. 9, 2017).

         2. ...


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