United States District Court, D. Nevada
U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR GSAA HOME EQUITY TRUST 2007-3 ASSET-BACKED CERTIFICATES SERIES 2007-3, Plaintiff
SATICOY BAY LLC SERIES 3930 SWENSON; WIMBLEDON TENNIS CLUB HOMEOWNERS ASSOCIATION; and HOMEOWNER ASSOCIATION SERVICES, INC., Defendants
ORDER GRANTING IN PART THE MOTION TO DISMISS [ECF NO.
P. GORDON, UNITED STATES DISTRICT JUDGE
U.S. Bank National Association, as Trustee for GSAA Home
Equity Trust 2007-3 Asset-Backed Certificates Series 2007-3
(U.S. Bank), sues to determine whether a non-judicial
foreclosure sale conducted by defendant Wimbledon Tennis Club
Homeowners Association (Wimbledon) extinguished U.S.
Bank's deed of trust. Defendant Saticoy Bay LLC Series
3930 Swenson (Saticoy) purchased the property at the
homeowners association (HOA) foreclosure sale. Saticoy moves
to dismiss, arguing (among other things) that it is a bona
fide purchaser for value and U.S. Bank has not alleged any
defects that would warrant setting aside the sale. I grant
the motion in part.
a dispute over property located at 3930 Swenson Street #903
in Las Vegas. ECF No. 1 at 24. In 2006, the prior owner of
the property, David Reyna, obtained a loan from Greenpoint
Mortgage Funding, Inc., and the loan was secured by a deed of
trust encumbering the property. Id. at 22. The deed
of trust was assigned to U.S. Bank in April 2013.
Id. at 50-52.
2011, defendant Wimbledon recorded a notice of delinquent HOA
assessment lien through its agent, defendant Homeowner
Association Services, Inc. (HAS). Id. at 54-56. In
August 2013, HAS recorded another notice of delinquent
assessment lien. Id. at 58-60. About a year later,
HAS recorded a notice of default and election to sell.
Id. at 62-64. HAS then recorded a notice of sale,
setting the sale for June 25, 2015. Id. at 67-69.
The sale took place on that date, and defendant Saticoy
purchased the property for $27, 051.00. Id. at
Bank brought this lawsuit against Saticoy, Wimbledon, and
HAS, asserting claims for quiet title and declaratory relief.
U.S. Bank also asserts an unjust enrichment claim against
Saticoy, arguing that if the sale is set aside, Saticoy has
unjustly benefitted from using the property since the HOA
sale. Alternatively, U.S. Bank alleges that if the sale is
not set aside, then Saticoy has unjustly benefitted from U.S.
Bank's payment of taxes, insurance, and HOA assessments
since the time of the HOA sale.
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.
Quiet Title/Declaratory Relief
raises a series of arguments directed at the quiet title and
related declaratory relief claims. Saticoy contends the sale
is presumptively valid and the recitals in the deed upon sale
are conclusive proof that the HOA properly gave all of the
required notices. Saticoy asserts that U.S. Bank cannot
overcome those presumptions because it has not alleged facts
supporting its claim that the sale should be equitably set
aside. As part of this argument, Saticoy contends: (1) U.S.
Bank has unclean hands and failed to mitigate its damages
when it did nothing prior to the sale to protect its
interest; (2) the sale cannot be set aside because Saticoy is
a bona fide purchaser; (3) U.S. Bank has an adequate remedy
at law for damages against the HOA; (4) the HOA did not have
to identify the superpriority amount in the notices; (5) the
HOA sale did not violate due process; (6) the HOA sale was
not a taking; (7) the HOA foreclosure statute is not
unconstitutionally vague or ambiguous; (8) there is no
requirement that the sale be commercially reasonable; and (9)
the mortgage protection clause in the Covenants, Conditions,
and Restrictions (CC&Rs) is not a basis to set aside the
Bank responds that it has adequately alleged bases to set
aside the sale, including (1) the notices improperly included
collection fees and costs in the lien, did not indicate the
HOA was foreclosing on a superpriority lien, and did not
identify the superpriority amount or a right to cure; (2) the
CC&Rs contain a mortgage protection clause; (3) Saticoy
is not a bona fide purchaser; (4) the HOA sale was
commercially unreasonable; (5) the sale violated U.S.
Bank's due process rights; and (6) the sale constitutes a
taking without just compensation.
Bank's quiet title claim sounds in equity because it
seeks to resolve competing claims to interests in property.
See Shadow Wood HOA v. N.Y. Cmty. Bancorp, Inc., 366
P.3d 1105, 1111 (Nev. 2016) (en banc). “The unclean
hands doctrine generally bars a party from receiving
equitable relief because of that party's own inequitable
conduct.” Las Vegas Fetish & Fantasy Halloween
Ball, Inc. v. Ahern Rentals, Inc., 182 P.3d 764, 766
(Nev. 2008) (quotation omitted). The inequitable conduct must
be connected to the subject matter or transaction at issue in
the litigation and “unconscientious, unjust, or marked
by the want of good faith.” Id. (quotation
determine whether the unclean hands doctrine applies, I
consider two factors: “(1) the egregiousness of the
misconduct at issue, and (2) the seriousness of the harm
caused by the misconduct.” Id. at 767. The
unclean hands doctrine will bar an equitable remedy
“[o]nly when these factors weigh against granting the
requested equitable relief.” Id. I have
“broad discretion in applying these factors, ”
but my determination must be supported by “substantial
motion based on unclean hands is premature. Any determination
of whether to apply the doctrine must be based on substantial
evidence and a weighing of the misconduct versus the
seriousness of the harm that misconduct caused. I have no
evidence before me on these factors at the motion to dismiss
stage. I therefore deny Saticoy's motion to dismiss based
on unclean hands.
Failure to mitigate
generally “cannot recover damages for loss that he
could have avoided by reasonable efforts.” Sheehan
& Sheehan v. Nelson Malley & Co., 117 P.3d 219,
226 (Nev. 2005) (quotation omitted). Failure to mitigate
damages is an affirmative defense for which Saticoy bears the
burden of proof. Id.; see also Clark Cty. Sch.
Dist. v. Richardson Const., Inc., 168 P.3d 87, 95 &
n.20 (Nev. 2007). Saticoy has not presented evidence in
support of this affirmative defense. I therefore deny the
motion based on failure to mitigate.
Adequate remedy at law
a party cannot obtain an equitable remedy when it has an
adequate remedy at law. Las Vegas Valley Water Dist. v.
Curtis Park Manor Water Users Ass'n, 646 P.2d 549,
551 (Nev. 1982). However, Nevada Revised Statutes §
40.010, which allows for resolving disputes involving adverse
interests in property, “essentially codified”
Nevada's historical recognition “that courts retain
the power to grant equitable relief from a defective
foreclosure sale when appropriate . . . .” Shadow
Wood HOA, 366 P.3d at 1111-12. Thus, while the
availability of other remedies (both before and after the
sale) may bear on the equities,  a claim to set aside an
allegedly defective foreclosure sale is necessarily an
equitable one that will impact the various interests in the
property and their relative priority. U.S. Bank seeks not
just repayment of its loan, but the right to resort to this
particular property as security for repayment. No. remedy at
law could overturn the foreclosure sale and reinstate U.S.
Bank's lien on the property. See Bank of Am., N.A. v.
Diamond Fin., LLC, 42 N.E.3d 1151, 1156-57 (Mass. 2015)
(concluding a legal remedy was inadequate because
“money damages would not restore the plaintiff to ...