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Bank of America, N.A. v. Saticoy Bay LLC Series

United States District Court, D. Nevada

July 5, 2018

BANK OF AMERICA, N.A., Plaintiff
v.
SATICOY BAY LLC SERIES, Defendant

          ORDER GRANTING IN PART MOTION TO DISMISS AND GRANTING MOTION TO AMEND [ECF NOS. 8, 10]

          ANDREW P. GORDON UNITED STATES DISTRICT JUDGE

         Plaintiff Bank of America, N.A., successor by merger to BAC Home Loans Servicing, LP, formerly known as Countrywide Home Loans Servicing, LP (Bank of America), sues to determine whether a non-judicial foreclosure sale conducted by Sutton Place Homeowners Association (Sutton) extinguished Bank of America's deed of trust. Defendant Saticoy Bay LLC Series (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 Bank of America has not alleged any defects that would warrant setting aside the sale. I grant the motion in part.

         I. BACKGROUND

         This is a dispute over property located at 4955 South Jeffreys Avenue, #705 in Las Vegas. ECF No. 1 at 3. In 1984, a deed of trust securing a $36, 100 loan was recorded as an encumbrance on the property. Id. The deed of trust was assigned to Countrywide Home Loans (and thus to Bank of America as Countrywide's successor by merger) in June 2016. Id. at 4.

         In February 2014, Sutton recorded a notice of delinquent HOA assessment lien through its agent, Bruce Flammey. Id.; ECF No. 1-8. About a month later, Sutton recorded a notice of default and election to sell. ECF No. 1 at 5. A few months after that, Sutton recorded a notice of sale, setting the sale for July 2, 2014. Id.; ECF No. 1-10. The sale took place on that date, and defendant Saticoy purchased the property for $6, 100. ECF No. 1-11. Based on various allegations regarding the propriety of the HOA foreclosure sale, Bank of America brought this lawsuit against Saticoy, asserting claims for quiet title and unjust enrichment.

         II. ANALYSIS

         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.

         Saticoy raises a series of arguments directed at the quiet title claim. 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 Bank of America 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) Bank of America has unclean hands and failed to mitigate its damages when it did nothing prior to the sale to protect its interest; (2) Bank of America has an adequate remedy at law for damages against the HOA or its agent; (3) Saticoy is a bona fide purchaser; (4) the HOA did not have to identify the superpriority amount in the notices; and (5) the HOA sale did not violate due process.

         Bank of America responds that it has adequately alleged bases to set aside the sale and that Saticoy is not a bona fide purchaser, and it asserts the court must accept these allegations as true at this stage of the proceedings. Bank of America also contends that Saticoy's arguments about unclean hands and failure to mitigate raise fact issues not suitable for resolution on a motion to dismiss.

         A. Unclean Hands

         Bank of America'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 omitted).

         To 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 evidence.” Id.

         Saticoy's 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 against 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.

         B. ...


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