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Bank of New York v. Southern Highlands Community Association

United States District Court, D. Nevada

May 10, 2019

BANK OF NEW YORK, as Trustee for the Certificateholders of CWALT, Inc., Alternative Loan Trust 2005-84 Mortgage Pass-Through Certificates, Series 2005-84, Plaintiff


          Andrew P. Gordon, United States District Judge.

         Plaintiff Bank of New York (BONY) sues to determine whether a non-judicial foreclosure sale conducted by defendant Southern Highlands Community Association (Southern Highlands) extinguished BONY's deed of trust that encumbered property located at 10995 Calcedonian Street in Las Vegas, Nevada. Defendant SFR Investments Pool 1, LLC (SFR) purchased the property at the homeowners association (HOA) foreclosure sale.

         In its first amended complaint, BONY sued for declarations that its deed of trust remains as an encumbrance against the property and that it may enforce the deed of trust through either a judicial or non-judicial foreclosure sale. ECF No. 17. BONY also sued Southern Highlands for equitable indemnification and wrongful foreclosure in the event that BONY's deed of trust was extinguished by the HOA sale. Id.

         I granted SFR and Southern Highlands' motions to dismiss, ruling that BONY's declaratory relief and wrongful foreclosure claims were untimely. ECF No. 61. However, I granted BONY leave to amend to allege facts that may support equitable tolling of the limitations period. Id. I also ruled that BONY's equitable indemnification claim was timely but suggested that BONY consider whether equitable indemnity was a viable claim in the context of this case. Id.

         BONY filed a second amended complaint in which it reasserts its claim for declaratory relief regarding the deed of trust's validity. ECF No. 63 at 13-15. BONY also repleads its wrongful foreclosure claim, but asserts it only against Southern Highlands' foreclosure agent, Alessi & Koenig, LLC (Alessi). Id. at 16-17. BONY dropped its equitable indemnification claim and added a claim for breach of the Covenants, Conditions, and Restrictions (CC&Rs) against Southern Highlands. Id. at 15-16.

         SFR moves to dismiss and Southern Highlands moves for summary judgment, both arguing the declaratory relief and wrongful foreclosure claims are untimely.[1] They also both argue that my prior order did not grant BONY leave to add the new claim for breach of the CC&Rs. Alternatively, Southern Highlands contends the new claim lacks merit.

         BONY responds that it has adequately alleged a factual basis for equitable tolling for the declaratory relief claim. BONY asserts that SFR and Southern Highlands have no standing to challenge the timeliness of the wrongful foreclosure claim because that claim is asserted only against Alessi. Finally, BONY contends it properly added a claim for breach of the CC&Rs and that genuine issues of fact remain regarding whether Southern Highlands breached the CC&Rs.

         The parties are familiar with the facts, and I will not repeat them here except where necessary to resolve the motions. I grant SFR and Southern Highlands' motions as to the declaratory relief claim because BONY has not plausibly alleged a basis for equitable tolling. Additionally, I grant Southern Highlands' motion as to the newly added claim for breach of the CC&Rs because I did not grant leave for BONY to add a new claim, the time to amend the pleadings has passed, and BONY has not shown good cause to amend the scheduling order to allow late amendment to add a claim it has known or should have known about since the inception of this case.

         I deny SFR and Southern Highlands' motions to the extent they are directed at the wrongful foreclosure claim because that claim is asserted only against Alessi. However, the second amended complaint does not name Alessi as a defendant in the caption or in the section where it lists the parties to the action. Although BONY asserts that Alessi has failed to appear and defend this action, a summons has never been issued to Alessi, nor is there proof of timely service on Alessi even though the second amended complaint was filed over a year ago. I therefore order BONY to show cause why I should not dismiss Alessi from this case.

         II. ANALYSIS

         SFR moves to dismiss and Southern Highlands moves for summary judgment. I will review the second amended complaint under the motion to dismiss standard, but under either standard, the result would be the same because the parties do not dispute the facts with respect to equitable tolling and amendment. Rather, they dispute the legal significance of those facts.

         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. Declaratory Relief

         “A claim may be dismissed as untimely pursuant to a 12(b)(6) motion only when the running of the statute of limitations is apparent on the face of the complaint.” United States ex rel. Air Control Techs., Inc. v. Pre Con Indus., Inc., 720 F.3d 1174, 1178 (9th Cir. 2013) (alteration and quotation omitted). A limitation period begins to run “from the day the cause of action accrued.” Clark v. Robison, 944 P.2d 788, 789 (Nev. 1997). A cause of action generally accrues “when the wrong occurs and a party sustains injuries for which relief could be sought.” Petersen v. Bruen, 792 P.2d 18, 20 (Nev. 1990); see also State ex rel. Dep't of Transp. v. Pub. Emps.' Ret. Sys. of Nev., 83 P.3d 815, 817 (Nev. 2004) (en banc) (“A cause of action ‘accrues' when a suit may be maintained thereon.” (quotation omitted)). Nevada has adopted the discovery rule, and thus time limits generally “do not commence and the cause of action does not ‘accrue' until the aggrieved party knew, or reasonably should have known, of the facts giving rise to the damage or injury.” G & H Assocs. v. Ernest W. Hahn, Inc., 934 P.2d 229, 233 (Nev. 1997).

         The HOA foreclosure sale took place on September 19, 2012, the trustee's deed upon sale was recorded on October 9, 2012, and BONY filed the original complaint in this matter on October 20, 2017. ECF Nos. 1 at 1; 63 at 10. As I stated in my prior order, the four-year catchall limitation period in Nevada Revised Statutes § 11.220 applies to BONY's claim for a declaration that the deed of trust was not extinguished, so the claim is untimely. I nevertheless gave BONY leave to amend to allege facts supporting equitable tolling. The parties dispute whether BONY has adequately done so in its second amended complaint.

         “Equitable tolling operates to suspend the running of a statute of limitations when the only bar to a timely filed claim is a procedural technicality.” State Dep't of Taxation v. Masco Builder Cabinet Grp., 265 P.3d 666, 671 (Nev. 2011). Equitable tolling “is appropriate only when the danger of prejudice to the defendant is absent and the interests of justice so require.” Id. (quotation omitted). The inquiry “focuses on whether there was excusable delay by the plaintiff: If a reasonable plaintiff would not have known of the existence of a possible claim within the limitations period, then equitable tolling will serve to extend the statute of limitations for filing suit until the plaintiff can gather what information he needs.” City of N. Las Vegas v. State Local Gov't Employee-Mgmt. Relations Bd., 261 P.3d 1071, 1077 (Nev. 2011) (en banc) (quotation omitted). Nonexclusive factors to consider when determining whether it would be just to ...

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