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Wells Fargo Bank, N.A. v. The Sky Vista Homeowners Association

United States District Court, D. Nevada

April 13, 2017

WELLS FARGO BANK, N.A., Plaintiff,
v.
THE SKY VISTA HOMEOWNERS ASSOCIATION et al., Defendants.

          ORDER

          ROBERT C. JONES, United States District Judge

         This case arises out of a homeowners' association foreclosure sale. Pending before the Court is a motion for summary judgment.

         I. FACTS AND PROCEDURAL HISTORY

         In 2004, Kehar Singh gave an unidentified lender a promissory note for $168, 373 (“the Note”) to purchase real property at 9658 Black Bear Drive, Reno, Nevada, 89506 (“the Property”), which was secured by a deed of trust (“the DOT”) against the Property. (See Compl. ¶¶ 8, 13, ECF No. 1). The DOT was later assigned to Plaintiff Wells Fargo Bank, N.A. (“Wells Fargo”). (Id. ¶ 14). Singh has defaulted with over $156, 598.15 due on the Note, and Wells Fargo intends to foreclose the DOT against the Property. (Id. ¶¶ 15-17).

         Defendant The Sky Vista Homeowners' Association (“the HOA”) has completed its own foreclosure sale, however. (See Id. ¶¶ 2, 18-29). The HOA caused Kern & Associates, Ltd. to record a notice of delinquent assessment lien (“the NDAL”) as to the Property in 2011 indicating that $1, 088 was due, which amount included late charges, fees, fines, foreclosure fees, transfer fees, attorney's fees, costs, and other charges. (Id. ¶ 18). The HOA later caused Phil Frink & Associates, Inc. (“Frink”) to record a notice of default and election to sell (“the NOD”) indicating that $2, 259.30 was due, without specifying what amount was due for assessment fees versus interest, fees, collection costs, etc., and without specifying the superpriority amount of the HOA's lien. (Id. ¶ 19). The HOA later caused Frink to record a notice of trustee's sale (“the NOS”) scheduling a sale for May 10, 2012 and indicating that $3, 886.84 was due, without specifying what amount was due for assessment fees versus interest, fees, collection costs, etc., and without specifying the superpriority amount of the HOA's lien. (Id. ¶ 20). In May 2012, the previous servicer, Bank of America, N.A., contacted Frink and demanded a payoff ledger identifying the superpriority amount of the HOA's lien, but Frink refused to provide any information, thereby rejecting the attempted tender of the superpriority amount before the HOA foreclosure sale. (Id. ¶¶ 26-27). On March 29, 2013, the HOA sold the Property to Defendant TBD, LLC for $4, 367, less than 3% of the outstanding principal balance on the Note. (Id. ¶¶ 3, 28-29). Defendant TBR I, LLC purchased the Property from TBD on December 27, 2013. (Id. ¶ 4).

         Wells Fargo (as Indenture Trustee for the Registered Holders of IMH Assets Corp., Collateralized Asset-Backed Bonds, Series 2004-11) sued the HOA, TBD, and TBR I in this Court for: (1) quiet title; (2) violation of Nevada Revised Statutes section (“NRS”) 116.1113; and (3) common law wrongful foreclosure. Wells Fargo asks the Court in the alternative to set aside the HOA foreclosure sale, declare that the HOA foreclosure sale did not extinguish the DOT, or award damages resulting from the extinguishment of the DOT in violation of law.

         The HOA moved to dismiss based on Wells Fargo's failure to abide by state law pre-litigation exhaustion requirements. The Court denied the motion because non-exhaustion is an affirmative defense, and facts indicating non-exhaustion did not appear on the face of the Complaint. TBD and TDR I answered and counterclaimed for quiet title. (See Answer and Countercl., ECF No. 14). The HOA separately answered without pleading any counterclaims. (See Answer, ECF No. 20). TBD and TBR I later asked the Court to dismiss the quiet title claim against them and to substitute TBR I's grantee Airmotive Investments, LLC (“Airmotive”) as a Defendant under Rule 25(c). The Court granted the motion. Wells Fargo has now moved for offensive summary judgment.

         II. SUMMARY JUDGMENT 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. The moving party must first satisfy its initial burden. “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) (citation 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 (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. Pac. 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. Notably, facts are only viewed in the light most favorable to the nonmoving party where there is a genuine dispute about those facts. Scott v. Harris, 550 U.S. 372, 380 (2007). That is, even where the underlying claim contains a reasonableness test, where a party's evidence is so clearly contradicted by the record as a whole that no reasonable jury could believe it, “a court should not adopt that version of the facts for purposes of ruling on a motion for summary judgment.” Id.

         III. ANALYSIS

         Plaintiff seeks summary judgment on its quiet title claim on the bases that Chapter 116's notice scheme is facially unconstitutional, see Bourne Valley Court Tr. v. Wells Fargo Bank, N.A., 832 F.3d 1154, 1156 (9th Cir. 2016), that it tendered the superpriority amount of the HOA's lien prior to sale such that the DOT survived the sale, see U.S. Bank, N.A. v. SFR Invs. Pool I, LLC, No. 3:15-cv-241, 2016 WL 4473427 (D. Nev. Aug. 24, ...


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