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Nationstar Mortgage LLC v. Tow Properties, LLC

United States District Court, D. Nevada

April 27, 2018

NATIONSTAR MORTGAGE LLC, Plaintiff,
v.
TOW PROPERTIES, LLC II and FLAMINGO RIDGE HOMEOWNERS ASSOCIATION, Defendants.

          ORDER (1) DENYING MOTION TO DISMISS, (2) GRANTING MOTION FOR SUMMARY JUDGMENT, AND(3) ORDERING STATUS REPORT (ECF Nos. 12, 28)

          ANDREW P. GORDON, UNITED STATES DISTRICT JUDGE

         The parties dispute whether a deed of trust still encumbers property located at 6250 West Flamingo Road #39 in Las Vegas following a non-judicial foreclosure sale conducted by a homeowners association (HOA). Plaintiff Nationstar Mortgage LLC is the beneficiary of record for the deed of trust and is the servicer for Federal National Mortgage Association (Fannie Mae). Nationstar seeks a declaration that the deed of trust continues to encumber the property.

         Defendant Tow Properties, LLC II (Tow) purchased the property at the HOA foreclosure sale and is the current owner. Tow moves to dismiss on a variety of grounds. Nationstar opposes the motion to dismiss and separately moves for summary judgment on the basis that the federal foreclosure bar in 12 U.S.C. § 4617(b)(2)(A)(i) precludes the HOA foreclosure sale from extinguishing Fannie Mae's interest in the property.[1]

         I deny Tow's motion to dismiss and grant Nationstar's motion for summary judgment. Fannie Mae's interest cannot be extinguished by the HOA sale under the federal foreclosure bar.

         I. BACKGROUND

         Steven Cain purchased the property in June 2003. ECF No. 1-2. Cain financed the purchase through a loan from R.N.B., Inc., doing business as Cornerstone Mortgage. ECF No. 1- 4. The loan was secured by a deed of trust encumbering the property. Id. The deed of trust identified Cain as the borrower, Cornerstone as the lender, Land Title of Nevada as the trustee, and Mortgage Electronic Registration Systems, Inc. (MERS) as the beneficiary solely as nominee for the lender and its assigns. Id. at 3-4.

         In November 2006, Fannie Mae acquired ownership of Cain's loan and the associated deed of trust, and has owned them ever since. ECF No. 28-2 at 3, 7. The transfer to Fannie Mae is not recorded in the Clark County recorder's office. Fannie Mae's servicer for the loan initially was Flagstar Capital Markets Corporation. Id. at 4. Nationstar became Fannie Mae's servicer in September 2009 and remains the servicer. Id.

         In 2012, defendant Flamingo Ridge Homeowners Association recorded a notice of delinquent assessment lien, stating that Cain owed over $2, 000 in unpaid HOA assessments. ECF No. 1-6. A few months later, Flamingo Ridge recorded a notice of default and election to sell based on the unpaid assessments. ECF No. 1-7. In April 2013, MERS assigned the beneficial interest under the deed of trust to Nationstar. ECF No. 1-5. Flamingo Ridge recorded a notice of trustee's sale in July 2013, and set the sale for August 28, 2013. ECF No. 1-9. The property was sold on that date to Flamingo Ridge for close to $11, 000. ECF No. 1-10.

         In August 2014, Flamingo Ridge quitclaimed the property to Tow. ECF No. 1-11. Nationstar filed this lawsuit on June 27, 2017. ECF No. 1.

         II. MOTION TO DISMISS (ECF No. 12)

         In considering a motion to dismiss, “all well-pleaded allegations of material fact are taken as true and construed in a light most favorable to the non-moving party.” Wyler Summit P'ship v. Turner Broad. Sys., Inc., 135 F.3d 658, 661 (9th Cir. 1998). However, I do not necessarily assume the truth of legal conclusions merely because they are cast in the form of factual allegations in the complaint. See Clegg v. Cult Awareness Network, 18 F.3d 752, 754-55 (9th Cir. 1994). A plaintiff must make sufficient factual allegations to establish a plausible entitlement to relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007). Such allegations must amount to “more than labels and conclusions, [or] a formulaic recitation of the elements of a cause of action.” Id. at 555.

         A. Laches

         Tow argues Nationstar's suit is barred by the doctrine of laches because Nationstar waited too long after the HOA sale to bring its lawsuit. Nationstar responds that laches does not apply because it filed suit within the limitation period and there is no extraordinary circumstance to justify applying laches. Tow replies that Nationstar had the opportunity to act before the HOA foreclosure sale in addition to waiting several years after the sale to file suit. Tow argues that had Nationstar done so earlier, Tow could have protected itself, so this suit should be barred.

         Nationstar's suit sounds in equity because it seeks to resolve competing claims to interests in property. See Shadow Wood HOA v. N.Y. Cmty. Bancorp, 366 P.3d 1105, 1111 (Nev. 2016) (en banc) (stating that a person seeking to quiet title under Nevada Revised Statutes § 40.010 may invoke the court's equitable powers to resolve competing claims to title). “Laches is an equitable time limitation on a party's right to bring suit, . . . resting on the maxim that one who seeks the help of a court of equity must not sleep on his rights.” Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 835 (9th Cir. 2002) (quotations and internal citation omitted). The “laches determination is made with reference to the limitations period for the analogous action at law. If the plaintiff filed suit within the analogous limitations period, the strong presumption is that laches is inapplicable.” Id. Laches is an affirmative defense that “requires proof of (1) lack of diligence by the party against whom the defense is asserted, and (2) prejudice to the party asserting the defense.” In re Beaty, 306 F.3d 914, 926 (9th Cir. 2002). (quotation omitted).

         Nationstar filed this action within the limitation period for its quiet title claim, so laches presumptively does not apply. It is true that Fannie Mae, through Nationstar or its predecessor servicer, could have filed this suit earlier, and facts supporting some lack of diligence appear on the face of the complaint. But at the motion to dismiss stage, nothing in the complaint shows Tow's prejudice. Tow has not moved for summary judgment, and because laches is an affirmative defense, Tow bears the burden of showing prejudice. The conclusory statement in its brief that it could have protected its interests had Nationstar sued earlier is insufficient. I therefore deny the motion to dismiss based on laches.

         B. Nevada Revised Statutes § 38.310

         Tow argues the complaint should be dismissed because Nationstar did not first submit the matter to mediation as required under Nevada Revised Statutes § 38.310. Nationstar responds that its suit falls within an exception to the statute for an action relating to the property's title. Alternatively, Nationstar argues (1) its claims are not based on interpretations of the Covenants, Conditions, and Restrictions (CC&Rs), and (2) § 38.310 applies to suits by homeowners against homeowners associations, not suits by lienholders.

         As discussed below with respect to Nationstar's summary judgment motion, this case can be resolved by the federal foreclosure bar. Resolution of that question rests on the interpretation and application of 12 U.S.C. § 4617(j)(3) and does not require the interpretation, enforcement, or application of the CC&Rs. Section 38.310 therefore does not apply to the claim. See Fed. Nat'l Mortg. Ass'n v. SFR Investments Pool 1, LLC, No. ...


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