United States District Court, D. Nevada
before the court is defendant SFR Investments Pool 1,
LLC's motion to dismiss the complaint under Federal Rule
of Civil Procedure 12(b)(7) for failure to join an
indispensable party. (ECF No. 15). Plaintiff The Bank of New
York Mellon (BNYM) responded. (ECF No. 16; see also
ECF No. 17). SFR replied. (ECF No. 18).
complaint alleges that an HOA foreclosure sale did not
extinguish its deed of trust on the property. (ECF No. 1).
BNYM did not name the HOA-the party who collected the
proceeds from the HOA sale-as a defendant to this action.
Federal Rule of Civil Procedure 12(b)(7), failure to join an
indispensable party under Federal Rule of Civil Procedure 19
is grounds to dismiss the action. Federal Rule of Civil
Procedure 19(a)(1) states the following:
A person who is subject to service of process and whose
joinder will not deprive the court of subject-matter
jurisdiction must be joined as a party if: . . . (B) that
person claims an interest relating to the subject of the
action and is so situated that disposing of the action in the
person's absence may: (i) as a practical matter impair or
impede the person's ability to protect the interest; or
(ii) leave an existing party subject to a substantial risk of
incurring double, multiple, or otherwise inconsistent
obligations because of the interest.
Fed. R. Civ. P. 19; see also U.S. Bank, N.A. v. Ascente
Homeowners Ass'n, No. 2:15-cv-00302-JAD-VCF, 2015 WL
8780157, at *2 (D. Nev. Dec. 15, 2015).
argues that the HOA must be part of this litigation because
BNYM is seeking a ruling that the HOA sale itself is invalid.
(ECF Nos. 15, 18). The complaint seeks to set aside the HOA
foreclosure sale; it alleges that the sale was commercially
unreasonable and seeks quiet title in its favor as a result.
(See ECF No. 1 at 4 ¶ 31; 5 ¶¶ 32-38;
6 ¶ 44). NRS 116.3116 codifies the Uniform Common
Interest Ownership Act (“UCIOA”) in Nevada.
See Nev. Rev. Stat. § 116.001. Numerous courts
have interpreted the UCIOA and NRS 116.3116 as imposing a
commercial reasonableness standard on foreclosure of
Shadow Wood HOA v. N.Y. Cmty. Bancorp, the Nevada
Supreme Court held that an HOA's foreclosure sale may be
set aside under a court's equitable powers
notwithstanding any recitals on the foreclosure deed where
there is a “grossly inadequate” sales price and
“fraud, unfairness, or oppression.” 366 P.3d
1105, 1110 (Nev. 2016). In other words, “demonstrating
that an association sold a property at its foreclosure sale
for an inadequate price is not enough to set aside that sale;
there must also be a showing of fraud, unfairness, or
oppression.” Id. at 1112.
the HOA is a necessary party to this action based on the
current allegations and relief sought. The HOA has a present
interest in this action because BNYM challenges the validity
of the foreclosure sale or seeks to equitably set aside the
sale. See, e.g., U.S. Bank, N.A. v. Ascente Homeowners
Ass'n, No. 2:15-cv-00302-JAD-VCF, 2015 WL 8780157,
at *2 (D. Nev. Dec. 15, 2015). If the foreclosure sale is
invalidated or set aside, the HOA's superpriority lien
might be reinstated as an encumbrance against the property,
and the HOA could be liable to return the proceeds of the
sale to the buyer.
disposition of this action in the HOA's absence may
impair or impede its ability to protect its interests.”
U.S. Bank, N.A., 2015 WL 8780157, at *2. In
particular, if BNYM “succeeds in invalidating the sale
without the HOA being a party to this suit, separate
litigation to further settle the priority of the parties'
respective liens and rights may be necessary.”
Id. Thus, if the HOA is not a party, the HOA would
not be able to protect its interests in the subject matter of
this litigation, the court's ruling may leave BNYM or SFR
subject to a substantial risk of incurring double, multiple,
or otherwise inconsistent obligations because of the
HOA's interest, and SFR (and BNYM) would not be able to
secure the complete relief sought. See Deutsche Bank Natl
Tr. Co. for Ameriquest Mortg. Sec. Inc. v. SFR Investments
Pool 1 LLC, No. 216CV01827JCMPAL, 2017 WL 776113, at *2
(D. Nev. Feb. 28, 2017) (addressing this issue in a similar
case). The motion will be granted.
IT IS HEREBY ORDERED that defendant's motion to dismiss
(ECF No. 15) is GRANTED.
FURTHER ORDERED that the complaint (ECF No. 1) is DISMISSED
See, e.g., Bayview Loan Servicing,
LLC v. Alessi & Koenig, LLC, 962 F.Supp.2d 1222,
1229 (D. Nev. 2013) (“[T]he sale for $10, 000 of a
Property that was worth $176, 000 in 2004, and which was
probably worth somewhat more than half as much when sold at
the foreclosure sale, raises serious doubts as to commercial
reasonableness.”); SFR Investments Pool 1 v. U.S.
Bank, 130 Nev. Adv. Op. 75, 334 P.3d 408, 418 n.6
(2014), holding modified by Saticoy Bay LLC Series 350
Durango 104 v. Wells Fargo Home Mortg., a Div. of Wells Fargo
Bank, N.A., 388 P.3d 970 (Nev. 2017) (noting bank's
argument that purchase at association foreclosure sale was
not commercially reasonable); Thunder Props., Inc. v.
Wood, No. 3:14-cv-00068-RCJ-WGC, 2014 WL 6608836, at *2
(D. Nev. Nov. 19, 2014) (concluding that purchase price of
“less than 2% of the amounts of the deed of
trust” established commercial unreasonableness
“almost conclusively”); Rainbow Bend
Homeowners Ass'n v. Wilder, No.
3:13-cv-00007-RCJ-VPC, 2014 WL 132439, at *2 (D. Nev. Jan.
10, 2014) (deciding case on other grounds but noting that
“the purchase of a residential property free and clear
of all encumbrances for the price of delinquent HOA dues
would raise ...