United States District Court, D. Nevada
CAPITAL ONE, NATIONAL ASSOCIATION, a national banking association, Plaintiff,
SFR INVESTMENTS POOL 1, LLC, et al., Defendants.
J. Dawson United States District Judge.
the Court are three motions for summary judgment and one
motion to dismiss. Defendant Southern Highlands Community
Association (“HOA”) has filed a motion for
summary judgment (#102) to which plaintiff Capital One
responded (#112), and the HOA replied (#115).
a motion for summary judgment filed by Capital One (#104) to
which defendant SFR Investments Pool 1, LLC responded (#113),
and Capital One replied (#117).
SFR Investments Pool 1, LLC moved for summary judgment (#105)
to which Capital One responded (#114), and SFR replied
alternatively moved to dismiss Capital One's complaint
under Rule 12(b)(7). (##109/111). Capital One responded
(#116), and SFR replied (#119).
an action to quiet title following an HOA foreclosure and
trustee sale of a home at 5004 Benezette Court in Las Vegas,
Nevada. Capital One and SFR both claim a superior interest in
the property. Capital One seeks to quiet title on behalf of
the Federal Home Loan Mortgage Corporation (Freddie Mac). The
bank claims that at the time of the HOA foreclosure it was
the beneficiary-servicer under an agreement Freddie Mac. SFR
Investments Pool 1, LLC also seeks to quiet title. SFR
purchased the property at a trustee sale. That purchase, it
claims, extinguished Capital One's property interest
under NRS § 116, Nevada's non-judicial foreclosure
scheme. It disputes that Freddie Mac holds any interest under
the deed of trust and that the foreclosure was constitutional
and commercially reasonable. Southern Highlands Community
Association, the HOA, initiated the non-judicial foreclosure,
and its agent facilitated the sale. The HOA does not assert
an interest in the property.
One argues that the HOA foreclosure and subsequent sale of
the property did not extinguish Freddie Mac's deed of
trust because: (1) the Federal Foreclosure Bar of 12 U.S.C.
§ 4617(j)(3) preempted NRS § 116 and preserved
Freddie Mac's interest; (2) the HOA foreclosed under an
unconstitutional statute (NRS § 116); and (3) the
foreclosure sale was commercially unreasonable. Capital One
is correct that Freddie Mac indeed held a property interest
at the time the HOA foreclosed and that the Federal
Foreclosure Bar protected that interest from extinguishment.
As a result, Freddie Mac's deed of trust survived the
foreclosure. The Court therefore grants Capital One's
motion for summary judgment and finds that SFR's interest
in the property is subject to that of Freddie Mac.
Factual and Procedural Background
The Housing and Economic Recovery Act and Federal
passed the Housing and Economic Recovery Act in response to
the 2008 recession and its ensuing foreclosure crisis. The
purpose of the act was to protect the fragile housing market
by addressing the critical undercapitalization of the Federal
Home Loan Mortgage Corporation (Freddie Mac) and Federal
National Mortgage Association (Fannie Mae). It sought to
ensure that the two companies “operated in a safe and
sound manner . . . consistent with the public
interest.” 12 U.S.C. § 4513(a)(1)(B).
end, the act created the Federal Housing Finance Agency
(FHFA). It vested the FHFA with authority to place both
Fannie Mae and Freddie Mac under the Agency's
conservatorship, which it did in 2008. As conservator, the
FHFA was responsible for supervising and winding up
Fannie's and Freddie's affairs. 12 U.S.C. §
4617(a)(2). As conservatees, Freddie Mac and Fannie Mae
assets received certain federal protections, including
protection from non-consensual foreclosure. This has come to
be known as the “Federal Foreclosure Bar.” The
bar exempted Fannie and Freddie properties from “levy,
attachment, garnishment, foreclosure, or sale without the
consent of the Agency.” See id. §
4617(j)(3). The FHFA has not consented to these foreclosures
and has vowed not to consent in the future. Press Release,
Fed. Housing Fin. Agency, Statement on HOA Super-Priority
Lien Foreclosures (Apr. 21, 2015),
At bottom, the Federal Foreclosure Bar preserves Freddie
Mac's or Fannie Mae's property interests in the face
of a non-judicial foreclosure.
The Foreclosure and Sale of 5004 Benezette
August of 2004, Eilat Benaron acquired title to 5004
Benezette Court, a piece of real property in Las Vegas,
Nevada. The property was part of the Southern Highlands
Community Association and was subject to the
association's Covenants, Conditions, and Restrictions
(CC&Rs). (#105, Exh. A-1). Two years later, Benaron
obtained a $226, 300 mortgage on the property. That mortgage
was secured by a deed of trust that listed Benaron as the
borrower, Chevy Chase Bank as the lender, and Mortgage
Electronic Registration Systems (MERS) as nominee for
the lender's successors and assigns. (#63, Exh. 1 at
2-3). The deed of trust was recorded on September 22, 2006.
Id. at 2. Capital One claims that Freddie Mac
purchased the loan and obtained an interest in the property
in September of 2007. (#104, Exh. D at 3). It also claims
that Freddie Mac has not transferred or otherwise
relinquished its ownership in the property. Id. at
6. Capital One serviced the loan on behalf of Freddie Mac
from September 27, 2007 until July 16, 2018,  when Rushmore
Management Services assumed servicing duties on Freddie
Mac's behalf. Id. at 4.
point, Benaron defaulted on his mortgage payments and HOA
assessments. That default prompted a foreclosure action by
the HOA. On April 20, 2011, the HOA-through its agent, Alessi
and Koenig, LLC-recorded a Notice of Delinquent Assessment.
(#105, Exh. A-5). Benaron failed to satisfy the delinquency.
Alessi then recorded a Notice of Default and Election to
Sell. (#105, Exh. A-6). Benaron again failed to satisfy the
delinquency, which led Alessi to record a Notice of Sale and
hold a trustee sale. (#105, Exh. A-8). SFR purchased the
property at the trustee sale with a winning bid of $8, 500.
(#105, Exh. A-12). At no point did Capital One make a payment
to the HOA to satisfy the delinquency, nor did the bank
attend the auction or bid on the property. (#105 at 5).
2015, Capital One sued SFR to quiet title in the property.
(#1). It brought two causes of action: quiet title and
fraudulent transfer. Id at 3. Each cause of action
sought the same remedy: a declaration that its deed of trust
survived the HOA sale and still encumbers the property. If
so, SFR's interest in the property would, at minimum, be
subject to Freddie Mac's interest. Shortly thereafter,
Capital One amended its complaint to include the Southern
Highlands HOA. (#6). The bank did not alter its original
causes of action or modify its requested relief. SFR answered
the complaint and asserted its own quiet title action against
Capital One and Benaron. (#14 at 11). Benaron has not filed
an answer to SFR's claims or participated in the
litigation in any meaningful way, which led the Clerk of the
Court to enter default against him. (#106). In early 2017,
the parties filed their first motions for summary judgment.
(##59, 63). Before the Court could rule on those motions, it
stayed the case pending the final determinations of several
cases including the appeal of the Ninth Circuit's
decision in Bourne Valley Court Tr. v. Wells Fargo Bank,