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Prof-2013-S3 Legal Title Trust v. Flying Frog Avenue Trust

United States District Court, D. Nevada

November 7, 2017

PROF-2013-S3 LEGAL TITLE TRUST, BY U.S. BANK NATIONAL ASSOCIATION, AS LEGAL TITLE TRUSTEE Plaintiff,
v.
FLYING FROG AVENUE TRUST, a Nevada Limited Liability Company; DOE Individual I-X inclusive; and ROE Business Entities XI-XX inclusive; Defendants. EXHIBIT NUMBER DESCRIPTION

          WRIGHT, FINLAY & ZAK, LLP EDGAR C. SMITH, ESQ. Nevada Bar No. 05506 ROCK K. JUNG, ESQ. Nevada Bar No. 10906 Attorneys For: PROF-2013-S3 Legal Title Trust, U.S. Bank National Association, as Legal Title Trustee

          LAW OFFICES OF MICHAEL F. BOHN, ESQ., LTD. MICHAEL F. BOHN, ESQ. Nevada Bar No. 1641 ADAM R. TRIPPIEDI, ESQ. Nevada Bar No. 12294 Attorneys For: Flying Frog Avenue Trust

          STIPULATION AND ORDER TO ALLOW PLAINTIFF TO AMEND ITS COMPLAINT TO ADD PARTIES

         COMES NOW, Plaintiff, PROF-2013-S3 Legal Title Trust, by U.S. Bank National Association, as Legal Title Trustee (hereinafter “Plaintiff” or “U.S. Bank”), by and through its attorney, ROCK K. JUNG, ESQ., of the law firm of Wright, Finlay & Zak, LLP, and Defendant, Flying Frog Avenue Trust (hereinafter “Frog” or “Defendant”), by and through its counsel of record, Michael F. Bohn, Esq. and Adam R. Trippiedi, Esq. of the Law Offices of Michael F. Bohn, Esq., Ltd., and hereby stipulate and agree as follows:

         1. On July 14, 2017, Plaintiff filed the instant action concerning claims to the real property commonly known as 8970 Flying Frog Avenue, Las Vegas, NV 89148, APN# 176-05-813-041 (hereinafter the “Property”).

         2. On August 8, 2017, Defendant filed its Motion to Dismiss.

         3. On August 22, 2017, Plaintiff filed it Opposition to Defendant's Motion to Dismiss.

         4. On August 28, 2017, Defendant filed its Reply in support of its Motion to Dismiss.

         5. On August 30, 2017 the parties submitted their Proposed Joint Discovery Plan and Scheduling Order.

         6. On September 14, 2017 Plaintiff propounded discovery to Defendant.

         7. The parties have exchanged their initial disclosures.

         8. At this time, the parties agree that Venezia Community Association (hereinafter “HOA”) and Red Rock Financial Services (hereinafter “HOA TRUSTEE”) are necessary parties to the instant action and agree that Plaintiff should be permitted to amend its complaint to assert claims against the HOA and HOA TRUSTEE.

         IT IS HEREBY STIPULATED AND AGREED that Plaintiff. shall have leave to amend its pleadings in the form of a First Amended Complaint a copy of which is attached as Exhibit 1.

         IT IS FURTHER STIPULATED AND AGREED that Plaintiff shall file its First Amended Complaint within seven (7) days of entry of the order approving this stipulation.

         IT IS SO STIPULATED.

         ORDER

         IT IS SO ORDERED.

         Exhibit 1

         [PROPOSED] FIRST AMENDED COMPLAINT FOR QUIET TITLE AND DECLARATORY RELIEF

         COMES NOW Plaintiff, PROF-2013-S3 LEGAL TITLE TRUST, BY U.S. BANK NATIONAL ASSOCIATION, AS LEGAL TITLE TRUSTEE (hereinafter “Plaintiff” or U.S. Bank), by and through its attorneys of record, Edgar C. Smith, Esq., and Rock K. Jung, Esq., of the law firm of Wright, Finlay & Zak, LLP, and hereby files this civil action against the Defendants.

         PARTIES, JURISDICTION AND VENUE

         1. The real property at issue is known as 8970 Flying Frog Avenue, Las Vegas, Nevada 89148, APN: 176-05-813-041 (hereinafter, the “Property”).

         2. The Court has subject matter jurisdiction over this matter pursuant to 28 U.S.C. § 1332, as all Plaintiff are “citizens of different States” from all defendants and the amount in controversy exceeds $75, 000, exclusive of interest and costs. This Court also has original federal question jurisdiction under 28 U.S.C. § 1331 because Plaintiff is asserting civil claims arising under the Constitution, laws, or treaties of the United States.

         3. Venue is proper in this judicial district pursuant to 28 U.S.C. §§ 1391(b)(1)-(2) because Defendant resides in this district; a substantial part of the events or omissions giving rise to Plaintiff's claims occurred in this district; and the Property that is the subject of this action is situated in this district, in Las Vegas, Clark County, Nevada.

         4. Plaintiff is a national banking association, with its principal place of business in Ohio, organized and existing under the laws of the United States.

         5. Plaintiff is now and at all times relevant herein, the assigned Beneficiary under a Deed of Trust signed by Michael Moyer (hereinafter “Moyer”), and recorded on April 1, 2009, (hereinafter “Deed of Trust”), which encumbers the Property and secures a promissory note.

         6. Upon information and belief, Flying Frog Avenue Trust (hereinafter “Buyer”), is an entity of unknown form and claims to be the current titleholder of the Property.

         7. Upon information and belief, Venezia Community Association (hereinafter the “HOA”) is a Nevada domestic non-profit Corporation, licensed to do business in the State of Nevada, and was the HOA that foreclosed on the Property.

         8. Upon information and belief, Red Rock Financial Services (hereinafter “HOA Trustee”) is a foreign limited-liability company licensed to do business in the State of Nevada, and acted as the foreclosure trustee, which allegedly mailed and served the foreclosure notices, if any, and cried the foreclosure sale for the HOA.

         9. In accordance with NRS Chapter 38.310, Plaintiff has filed a Nevada Real Estate Division Alternative Dispute Resolution (hereinafter, “NRED”) claim and already named both the HOA and the HOA Trustee as Respondents.

         GENERAL ALLEGATIONS

         10. On or about July 31, 2008, Moyer purchased the Property.[1]

         11. The Deed of Trust executed by Moyer identified Taylor, Bean & Whitaker Mortgage Corp. as the Lender, Mortgage Electronic Registration Systems, Inc. (“MERS”) as the Beneficiary, and Noble Title as the Trustee, securing a loan in the amount of $164, 607.00 (hereinafter the “Moyer Loan”).[2]

         12. The Moyer Loan is insured by the Federal Housing Administration (“FHA”), an agency of the United States of America.

         13. FHA's case number on the Deed of Trust is 332-4825340-703.

         14. On September 8, 2010, a Corporate Assignment of Deed of Trust was recorded in which MERS as nominee for Taylor, Bean & Whitaker Mortgage Corp. assigned all beneficial interest in the Deed of Trust to BAC Home Loans Servicing, LP fka Countrywide Home Loans Servicing, LP.[3]

         15. On May 29, 2014, an Assignment of Deed of Trust was recorded in which Bank of America, N.A., Successor by Merger to BAC Home Loans Servicing, LP fka Countrywide Home Loans Servicing, LP assigned all beneficial interest in the Deed of Trust to Secretary of Housing and Urban Development.[4]

         16. On July 1, 2014, an Assignment of Deed of Trust was recorded in which Secretary of Housing and Urban Development assigned all beneficial interest in the Deed of Trust to U.S. Bank National Association, as trustee for SROF-2013-S3 REMIC Trust I.[5]

         17. On July 20, 2015, an Assignment of Deed of Trust was recorded in which U.S. Bank National Association, as trustee for SROF-2013-S3 REMIC Trust I assigned all beneficial interest in the Deed of Trust to USROF III Legal Title Trust 2015-1, by U.S. Bank National Association, as Legal Title Trustee.[6]

         18. On December 15, 2016, an Assignment of Deed of Trust was recorded in which U.S. ROF III Legal Title Trust 2015-1, by U.S. Bank National Association, as Legal Title Trustee assigned all beneficial interest in the Deed of Trust to PROF-2013-S3 Legal Title Trust, by U.S. Bank National Association, as Legal Title Trustee.[7]

         19. On June 6, 2011, a Notice of Delinquent Assessment (“HOA Lien”) was recorded against the Property by the HOA Trustee, on behalf of the HOA.[8]

         20. On July 26, 2011, a Notice of Default and Election to Sell Pursuant to the Lien for Delinquent Assessments was recorded against the Property by the HOA Trustee on behalf of the HOA, stating that the amount due as of July 21, 2011 was $2, 531.40.[9]

         21. On or about August 17, 2011, Bank of America, N.A., as successor by merger to BAC Home Loans Servicing, LP (“BANA”), the prior beneficiary/servicer, through prior counsel Miles, Bauer, Bergstrom & Winters, LLP (hereinafter “MBBW”), sent correspondence to the HOA Trustee requesting super-priority payoff information.[10]

         22. On or about August 30, 2011, the HOA Trustee in response sent MBBW an accounting ledger for the Property.[11]

         23. On or about September 16, 2011, in response to the payoff ledger received from the HOA Trustee, MBBW tendered not less than the super-priority lien amount to the HOA Trustee.[12]

         24. MBBW's tender, on behalf of BANA satisfied the statutory super-priority lien amount that could be claimed against the Property by the HOA.

         25. The HOA Trustee refused to accept BANA's super-priority lien amount.

         26. The HOA had no legal right to reject the tender of the super-priority amount by Plaintiff's predecessor, BANA.

         27. Despite tender of the super-priority portion of the lien, the HOA Trustee and the HOA proceeded with a non-judicial foreclosure sale.

         28. On September 10, 2012, a Notice of Foreclosure Sale was recorded against the Property by the HOA Trustee on behalf of the HOA, stating that the amount due as of the initial publication of the Notice of Sale was $4, 359.13.[13]

         29. Upon information and belief, pursuant to the Foreclosure Deed, a non-judicial foreclosure sale occurred on February 4, 2013 (hereinafter, the “HOA Sale”), whereby Buyer acquired its interest, if any, in the Property for $6, 002.00.[14]

         30. The Foreclosure Deed Upon Sale did not state the amount of unpaid debt at the time of the HOA Sale.

         31. A homeowner's association sale conducted pursuant to NRS Chapter 116 must comply with all notice provisions as stated in NRS 116.31162 through NRS 116.31168 and NRS 107.090.

         32. A lender or holder of a beneficial interest in a senior deed of trust, such as Plaintiff and its predecessors-in-interest in the Deed of Trust, has a right to cure a delinquent homeowner's association lien in order to protect its interest.

         33. Reasonable notice of delinquency to all lien holders on the Property are required pursuant to the Declaration of Covenants, Conditions, and Restrictions for Venezia (“CC&Rs”).[15]

         34. Upon information and belief, the HOA and its agent, the HOA Trustee, did not comply with all mailing and noticing requirements stated in NRS 116.31162 through NRS 116.31168, or as required by the CC&Rs.

         35. A recorded notice of default must “describe the deficiency in payment.”

         36. The above-identified Notice of Default did not properly “describe the deficiency in payment” in violation of NRS Chapter 116.

         37. The HOA assessment lien and foreclosure notices included improper fees and costs in amount demanded.

         38. The HOA Sale occurred without notice to Plaintiff, or its predecessors, agents, servicers or trustees, what proportion whether any amount of the HOA lien included a super-priority amount.

         39. The HOA Sale occurred without notice to Plaintiff, or its predecessors, agents, servicers or trustees, whether the HOA was foreclosing on the “super-priority” portion of its lien, if any, or under the non-super-priority portion of the lien.

         40. The HOA Sale occurred without notice to Plaintiff, or its predecessors, agents, servicers or trustees, of a right to cure the delinquent assessments and the super-priority lien, if any.

         41. The HOA Sale violated Plaintiff's rights to due process because Plaintiff was not given proper, adequate notice and the opportunity to cure the deficiency or default in the payment of the HOA's assessments and the super-priority lien, if any.

         42. The HOA Sale was an invalid sale and could not have extinguished Plaintiff's secured interest because of defects in the notices given to Plaintiff, or its predecessors, agents, servicers or trustees, if any.

         43. Under NRS Chapter 116, a lien under NRS 116.3116(1) can only include costs and fees that are specifically enumerated in the statute.

         44. A homeowner's association may only collect as a part of the super priority lien (a) nuisance abatement charges incurred by the association pursuant to NRS 116.310312 and (b) nine months of common assessments which became due prior to the institution of an action to enforce the lien.

         45. Upon information and belief, the HOA Foreclosure Notices included improper fees and costs in the amount demanded.

         46. The attorney's fees and the costs of collecting on a homeowner's association lien cannot be included in the super-priority lien.

         47. Upon information and belief, the HOA assessment lien and foreclosure notices included fines, interest, late fees, dues, attorney's fees, and costs of collection that are not properly included in a super-priority lien under Nevada law and that are not permissible under NRS 116.3102 et seq.

         48. The HOA Sale did not comply with NRS 116.3102 et seq. because none of the aforementioned notices identified above identified what portion of the claimed lien were for alleged late fees, interest, fines/violations, or collection fees/costs.

         49. The HOA Sale deprived Plaintiff of its right to due process because the foreclosure notices failed to identify the super-priority amount, to adequately describe the deficiency in payment, to provide Plaintiff notice of the correct super-priority amount, and to provide a reasonable opportunity to satisfy that amount.

         50. Alternatively, the sale itself was valid but Buyer took its interest subject to Plaintiff's first position Deed of Trust.

         51. The HOA Sale is unlawful and void because the “opt-in” provision in NRS 116.3116 does not satisfy Constitutional Due Process safeguards under the 5th and 14thAmendment to the United States Constitution, nor Clause 1, Section 8, of the Nevada Constitution, so that the statute is unconstitutional on its face.

         52. The HOA Sale is unlawful and void because the statutory scheme set forth in NRS 116.3116, et seq. constitutes a regulatory taking of ...


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