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Nationstar Mortgage LLC v. Tyrolian Village Association, Inc.

United States District Court, D. Nevada

May 1, 2019

NATIONSTAR MORTGAGE LLC and FEDERAL NATIONAL MORTGAGE ASSOCIATION, Plaintiffs,
v.
TYROLIAN VILLAGE ASSOCIATION, INC. and AIRMOTIVE INVESTMENTS LLC, Defendants. AIRMOTIVE INVESTMENTS LLC, Counterclaimant,
v.
NATIONSTAR MORTGAGE LLC and FEDERAL NATIONAL MORTGAGE ASSOCIATION, Counter-Defendants.

          ORDER ON REMAND

          LARRY R. HICKS, UNITED STATES DISTRICT JUDGE

         In November 2017 and June 2018, the court issued two orders in this case (ECF Nos. 50, 60) which were subsequently appealed to the Ninth Circuit. Following the Nevada Supreme Court's decision in SFR Investments Pool 1, LLC v. Bank of New York Mellon, 422 P.3d 1248 (Nev. 2018) (en banc), the Ninth Circuit vacated the judgment and remanded the case to this court for reconsideration in light of this new relevant authority. ECF No. 65.

         The court now reconsiders the following motions: (1) motion to dismiss by Tyrolian Village Association, Inc. (“Tyrolian” or “HOA”) (ECF No. 23); (2) motion for partial summary judgment by Nationstar Mortgage LLC (“Nationstar”) and Federal National Mortgage Association (“Fannie Mae”) (collectively “plaintiffs”) (ECF No. 38); (3) motion for partial summary judgment by Nationstar and Fannie Mae (ECF No. 53); and (4) motion for partial summary judgment by Airmotive Investments, LLC (“Airmotive” or “counterclaimant”) (ECF No. 54).

         I. BACKGROUND

         In 2004, Gloria Brimm obtained a loan from CMG Mortgage, Inc. to purchase a property located at 1364 Carinthia Court, Incline Village, Nevada 89451. ECF No. 38-1.[1] This transaction gave rise to the first deed of trust on the property, which was recorded in Washoe County, Nevada, on July 29, 2004. Id. The deed of trust identified Gloria S. Brimm as the borrower, CMG Mortgage, Inc. as the lender, Stewart Title of Northern Nevada as trustee, and Mortgage Electronic Registration Service (“MERS”) as mortgagee and nominee for Lender and Lender's successors and assigns. Id. In 2013, MERS-as nominee for CM Mortgage, Inc., its successors and/or assigns-assigned the interest to Nationstar. ECF No. 38-2.

         The at-issue property sits in a community governed by Tyrolian, a homeowners' association, and is therefore subject to HOA assessments. See ECF No. 38-1; see Id. at 3; see ECF No. 45 at 4-6. After Brimm failed to pay the assessments as they came due, Tyrolian recorded a notice of delinquent assessment lien. ECF No. 38-3; ECF No. 45 at 6. When the delinquent assessments remained unpaid, Tyrolian recorded a notice of default and election to sell. ECF No. 38-4; ECF No. 45 at 6. Still, the delinquent assessments remained unpaid, prompting Tyrolian to record a notice of foreclosure sale. ECF No. 38-5; ECF No. 45 at 6. At the nonjudicial foreclosure sale held in July 2014, TBR I, LLC (a non-party) purchased the property. ECF No. 38-6; ECF No. 45 at 6-7. Airmotive then purchased the property from TBR I. ECF No. 38-7; ECF No. 45 at 7.

         Fannie Mae and Nationstar brought this action after the foreclosure sale, alleging eight causes of action: (1) declaratory relief under 12 U.S.C. § 4617(j)(3); (2) quiet title under 12 U.S.C. § 4617(j)(3); (3) declaratory relief under the Fifth and Fourteenth Amendment of the U.S. Constitution; (4) quiet title under the Fifth and Fourteenth Amendment of the U.S. Constitution; (5) declaratory judgment under 28 U.S.C. § 2201, N.R.S. § 40.010, and N.R.S. § 30.040 et seq.; (6) breach of N.R.S. § 116.1113; (7) wrongful foreclosure; and (8) injunctive relief. ECF No. 13. Airmotive brought two counterclaims: (1) quiet title and declaratory relief and (2) negligent or intentional misrepresentation. ECF No. 30. Airmotive asserts its second counterclaim solely against Nationstar. Id.

         On July 5, 2017, Tyrolian motioned this court to dismiss Nationstar's third, fifth, sixth, and seventh causes of action for failure to state a claim upon which relief could be granted. ECF No. 23. Nationstar filed a response (ECF No. 34), to which Tyrolian replied (ECF No. 37).[2]

         In August 2017, Fannie Mae and Nationstar moved for partial summary judgment, requesting the court apply Bourne Valley Court Trust v. Wells Fargo Bank, NA, 832 F.3d 1154 (9th Cir. 2016), cert. denied, 137 S.Ct. 2296 (2017) to their quiet-title and declaratory-judgment claims. ECF No. 38. Tyrolian and Airmotive responded (ECF Nos. 41, 45), and plaintiffs replied (ECF Nos. 44, 46).

         In November 2017, the court granted summary judgment on plaintiffs' claim to quiet title under the Fourteenth Amendment to the United States Constitution, relying on the Ninth Circuit's holding in Bourne Valley. ECF No. 50. In Bourne Valley, the Ninth Circuit ruled that the notice scheme in NRS Chapter 116 facially violated due process principles under the Fourteenth Amendment. 832 F.3d at 1156. Because the at-issue foreclosure sale occurred under the same version of NRS Chapter 116, the court was bound by the Bourne Valley decision. See ECF No. 50. Thus, the court granted summary judgment on plaintiffs' claim to quiet title under the Fourteenth Amendment, finding that the foreclosure sale could not have extinguished the first deed of trust. Id. The court also dismissed as moot the parties' remaining claims to quiet title on the property and for declaratory relief. Id.

         As a result of that order, a single claim remained in the matter: Airmotive's claim for negligent or intentional misrepresentation against Nationstar. See Id. In the complaint, plaintiffs alleged that Fannie Mae acquired ownership of the underlying mortgage in 2004. ECF No. 13. Based on this allegation, Airmotive claimed that Nationstar misrepresented its interest in the property by recording documents that identified Nationstar as the holder, beneficiary, and servicer of the mortgage secured by the first deed of trust. Id. Airmotive asserted that Nationstar misrepresented its interest by including the title of “holder” in the recorded documents and by omitting any indication of Fannie Mae's ownership of the mortgage. Id. Airmotive also alleged that it relied on Nationstar's statements when purchasing the property. Id.

         In June 2018, the court granted plaintiffs' motion for partial summary judgment (ECF No. 53) and denied defendant's motion for summary judgment (ECF No. 54). Again, the court relied on Bourne Valley, which at the time was still binding law in this District. ECF No. 60.

         While the court's two decision were on appeal to the Ninth Circuit, the Nevada Supreme Court decided SFR Invs. Pool 1, LLC v. Bank of N.Y. Mellon, 422 P.3d 1248, 1253 (Nev. 2018), which effectively overruled Bourne Valley on an issue of state law. The Ninth Circuit therefore vacated the court's prior judgments, and the case was remanded to this court for reconsideration in light of this new authority. ECF No. 65. The court now reconsiders the parties prior motions.

         II. LEGAL STANDARD

         A. Motion to Dismiss Pursuant to Federal Civil Procedure Rule 12(b)(6)

         A party may seek the dismissal of a complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a legally cognizable cause of action. See Fed. R. Civ. P. 12(b)(6) (stating that a party may file a motion to dismiss for “failure to state a claim upon which relief can be granted[.]”). To survive a motion to dismiss for failure to state a claim, a complaint must satisfy the notice pleading standard of Federal Rule 8(a)(2). See Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1103 (9th Cir. 2008). Under Rule 8(a)(2), a complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Rule 8(a)(2) does not require detailed factual allegations; however, a pleading that offers only “‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action'” is insufficient and fails to meet this broad pleading standard. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)).

         To sufficiently allege a claim under Rule 8(a)(2), viewed within the context of a Rule 12(b)(6) motion to dismiss, a complaint must “contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Id. (quoting Twombly, 550 U.S. at 570). A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference, based on the court's judicial experience and common sense, that the defendant is liable for the alleged misconduct. See Id. at 678-679 (stating that “[t]he plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief.” (internal quotation marks and citations omitted)). Further, in reviewing a motion to dismiss, the court accepts the factual allegations in the complaint as true. Id. However, bare assertions in a complaint amounting “to nothing more than a formulaic recitation of the elements of a . . . claim . . . are not entitled to an assumption of truth.” Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (quoting Iqbal, 556 U.S. at 698) (internal quotation marks omitted). The court discounts these allegations because “they do nothing more than ...


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