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Pengilly v. Nevada Association Services

United States District Court, D. Nevada

March 31, 2017

JAMES W. PENGILLY, Plaintiffs,
v.
NEVADA ASSOCIATION SERVICES et al., Defendants.

          ORDER

          RICHARD F. BOULWARE, II UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         Before the Court are Plaintiff's and Defendants' Motions for Summary Judgment. ECF Nos. 81, 82, 83, 84, 85, and 88. For the reasons stated below ECF No. 81 Motion for Summary Judgment is denied with prejudice in part and denied without prejudice in part; ECF No. 82 Motion for Summary judgment is GRANTED; ECF No. 83 is GRANTED in part and DENIED in part; ECF No. 84 Motion for Summary Judgment is DENIED as moot; and ECF Nos. 85 is denied with prejudice in part and denied without prejudice in part; ECF No. 88 Motion for Summary Judgment is DENIED.

         II. BACKGROUND

         This case involves a dispute over real property foreclosed on by a Homeowners Association (HOA). The Property, located at 1141 Allerton Park, #411, Las Vegas, Nevada 89109, was originally owned by Plaintiff James Pengilly. The parties now dispute the validity of the foreclosure and title to the property.

         Plaintiffs and counterclaimants bring the following causes of action: Ke Aloha Holdings, LLC (“Ke Aloha”) asserts claims for quiet title and declaratory relief that it is the proper owner of the property. Ditech Financial, LLC, formerly known as Green Tree Servicing, LLC (“Ditech”) seeks declaratory relief that the foreclosure sale was void as a matter of law. James Pengilly asserts quiet title and declaratory relief that he is the rightful owner and the foreclosure was invalid.

         This case was removed on September 10, 2014 by counter-defendant Internal Revenue Service. ECF No. 1. At a hearing on January 13, 2016, the Court denied without prejudice a pending Motion for Summary Judgment and Motion to Dismiss, permitting the parties to refiled at the close of discovery ECF No.70. Discovery closed on March 23, 2016. ECF No. 58. The parties filed their Motions for Summary Judgment on March 30, 2016.

         II. LEGAL STANDARD

         A. Motion for Summary Judgment

         Summary judgment is appropriate 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); accord Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). When considering the propriety of summary judgment, the court views all facts and draws all inferences in the light most favorable to the nonmoving party. Gonzalez v. City of Anaheim, 747 F.3d 789, 793 (9th Cir. 2014). If the movant has carried its burden, the non-moving party “must do more than simply show that there is some metaphysical doubt as to the material facts . . . . Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.” Scott v. Harris, 550 U.S. 372, 380 (2007) (alteration in original) (internal quotation marks omitted).

         III. Motion for Summary Judgment by Defendants Stuhmer et al. ECF No. 82.

         The individual defendants who raise this motion are in the case only as defendants to James Pengilly's claims for quiet title and declaratory relief. NAS is a defendant in those claims as well as Ditech.

         A. Undisputed Facts

         The Court finds the following facts to be undisputed. The individual defendants bringing this motion are former members of the executive board of the Home Owners Association (“HOA”) at the time of the non-payment, alleged default, and foreclosure. Nevada Association Services (“NAS”) was the trustee and private debt collector hired by the HOA that carried out the foreclosure. Neither individual former members of the HOA executive board nor NAS have claimed or now claims any interest in the property or proceeds from the foreclosure sale.

         B. Legal Standard

         NRS 40.010 governs Nevada quiet title actions and provides: “An 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.” “In a quiet title action, the burden of proof rests with the plaintiff to prove good title in himself.” Breliant v. Preferred Equities Corp, 918 P.2d 314, 318 (Nev. 1996). “[T]here is a presumption in favor of the record titleholder.” Id.

         “[A] court will refuse to consider a complaint for declaratory relief if a special statutory remedy has been provided. A separate action for declaratory judgment is not an appropriate method of testing defenses in a pending action, nor is it a substitute for statutory avenues of judicial and appellate review.” Public Service Com'n of Nevada v. Eighth Judicial Dist. Court of State of Nev., 818 P.2d 396, 399 (Nev. 1991) (internal citations omitted). The United States Supreme Court has stated the following as to standing in cases for declaratory relief: “Basically, the question in each case is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” Medlmmune, Inc. v. Genentech, Inc., 549 U.S. 119, 127 (2007) (quoting Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273 (1941)).

         C. Discussion

         Defendants argue that the individual board members are not proper parties to this action. The individual parties are only in this case as Defendants in Pengilly's claims for quiet title (and the derivative “claim” for declaratory relief). Defendants argue that Nevada statutes governing claims related to statutory HOA requirements preclude claims against individual members. NRS 116.4117(2)(a)-(c) provides as follows: “Subject to the requirements set forth in NRS 38.310 and except as otherwise provided in NRS 116.3111, a civil action for damages or other appropriate relief for a failure or refusal to comply with any provision of this chapter or the governing documents of an association may be brought: (a) by the association against: (1) a declarant; (2) a community manager; or (3) a unit's owner; (b) by a unit's owner against: (1) the association; (2) a declarant; or (3) another unit's owner of the association; (c) by a class of units' owners constituting at least 10 percent of the total number of voting members of the association against a community manager”. In their Reply and in their Response to Pengilly's MSJ, Defendants further argue that NRS 40.010, governing quiet title actions, permits suits against those who claim an adverse “estate or interest” in the property at issue. Pengilly argues that while individual members are absent from NRS 116.4118(2), their behavior is governed by NRS 116.31183, prohibiting certain forms of retaliation. Pengilly further argues that the misconduct of NAS and the HOA members is relevant to his claim for declaratory relief where he claims that he has superior interest in the property and that the foreclosure auction was invalid.

         Pengilly's only claims are for quiet title and declaratory relief as to title-and the invalidity of the foreclosure sale, so as to establish title. Pengilly asserts no other statutory cause of action, and makes no claim that would require action or payment on the part of the individual former members of the HOA. Even if HOA members had some authority to provide relief, it is undisputed that these individuals do not control the current HOA, and that they did not file any liens and did not and do not claim any interest in the property. Pengilly represents in his Motion for Summary Judgment (ECF 88) that only Ke Aloha claims an adverse interest in the property. In his deposition he stated he is unaware of any liens by individual members, and there are no facts in record showing any interest by individual members.

         The plain language of NRS 40.010 permits quiet title claims against those who could provide and would be necessary for relief, parties claiming some adverse interest in the property. In evaluating the claims against Ke Aloha, the party with an adverse interest in the property, the Court can consider the claims as to the legitimacy of the foreclosure sale, and issue such declaratory relief as necessary and proper. But NAS and the individual members have no present interest in the determination of title or the determination of the legitimacy of the foreclosure sale. They are not necessary or indispensable to the claim for quiet title.

         Even if the complaint could be read to seek declaratory judgment against these Defendants, the judgment as against these defendants would have no present or reasonably likely future impact on either Plaintiff or the Defendants. As such there may be no cognizable case or controversy sufficient to satisfy Article III standing. Therefore, the individual defendants will be dismissed from the case.

         For the same reason, NAS must be dismissed from Pengilly's claims. The undisputed facts show that NAS acted as the foreclosure trustee or private debt collector for the HOA, and there is no evidence that NAS ever claimed any interest in the property. Therefore, NAS is dismissed from Pengilly's claims. NAS remains in the case as a defendant in Ditech's cross-claims. Therefore, the Court GRANTS ECF No. 82 Motion for Summary Judgment.

         IV. Motions for Summary Judgment by James Pengilly, ECF No. 88, and Ke Aloha Holdings, ECF No. 81.

         A. Undisputed Facts

         The Court finds the following facts to be undisputed.

         Plaintiff James W. Pengilly's ("Plaintiff' or "Pengilly") purchased the Property located within the Association on August 29, 2007, as evidenced by a Grant, Bargain, Sale Deed, recorded in the Clark County Recorder's Office in Book No. 20070829, as Instrument 02229. James Pengilly, as trustee, pledged the Property to secure repayment of a promissory note for $414, 400.00 to Bank of America, N.A. The beneficial interest of the Deed of Trust was transferred and assigned to Ditech and recorded on November 17, 2011. Fannie Mae has been the owner of the loan continuously since origination. Ditech is the undisputed beneficiary of the First Deed of Trust.

         The Declaration requires, among other things, that each owner of a unit that has been annexed into the Association, including Pengilly, must pay to the Association monthly assessments. An owner's failure to pay assessments results in an automatically perfected, foreclosable delinquent assessment lien. On or about March 14, 2012, Pengilly and fifteen (15) other unit owners in WCL filed a lawsuit against Mark A. Stuhmer, Douglas L. Crook, Bill Blanchard, Kenneth R. Sailley, Erika Geiser (together "HOA's Executive Board") and other parties alleging violations of NRS 116 as well as other causes of action (“HOA Lawsuit”). Pengilly failed to pay overdue homeowners' assessments and, accordingly, on July 19, 2012, a Notice of Delinquent ...


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