United States District Court, D. Nevada
ORDER (1) GRANTING DEFENDANT LEACH JOHNSON SONG &
GRUCHOW, LTD.'S MOTION TO DISMISS, (2) GRANTING IN PART
DEFENDANT SIERRA RANCH HOMEOWNERS ASSOCIATION'S MOTION TO
DISMISS, AND (3) DENYING MOTION FOR SANCTIONS [ECF NOS. 51,
P. GORDON, UNITED STATES DISTRICT JUDGE
a dispute over property located at 5841 Feral Garden Street,
North Las Vegas, Nevada. Plaintiff Linear Mortgage, LLC
(Linear) holds a deed of trust that encumbered the property.
Defendant Sierra Ranch Homeowners Association (Sierra)
foreclosed on the property after the former owner did not pay
homeowners association (HOA) assessments. Defendant Saticoy
Bay LLC Series 5841 Feral Garden (Saticoy) purchased the
property at the HOA foreclosure sale. The parties dispute
whether the HOA foreclosure sale extinguished the deed of
trust and, if so, whether Sierra and its foreclosure agent,
defendant Leach Johnson Song & Gruchow, Ltd. (Leach), owe
damages to Linear.
count one of its complaint, Linear seeks to determine adverse
interests in the property, contending that the HOA
foreclosure sale did not extinguish its deed of trust. Linear
also asserts against Sierra and Leach claims for breach of
Nevada Revised Statutes § 116.1113, wrongful
foreclosure, and deceptive trade practices. Sierra and Leach
move to dismiss. Leach separately moves for sanctions under
Federal Rule of Civil Procedure 11 and for attorney's
fees under Nevada Revised Statutes § 18.010.
parties are familiar with the facts, and I will not repeat
them here except where necessary to resolve the motions. I
grant Leach's motion to dismiss and I grant in part
Sierra's motion to dismiss, with leave for Linear to
amend. I deny Leach's motion for sanctions.
MOTIONS TO DISMISS
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 assume
the truth of legal conclusions merely because they are cast
in the form of factual allegations. 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.
and Sierra argue Linear's claims are untimely. They
contend that claims challenging a non-judicial foreclosure
sale should have been brought within 45 or 60 days of the
sale under Nevada Revised Statutes §§
107.080(5)-(6). Linear responds that its declaratory relief
claim is timely because no statute of limitations applies to
such a claim, it is a defense to a future wrongful
foreclosure claim by Saticoy, or it is subject to a ten-year
limitation period in Nevada Revised Statutes § 106.240.
Linear argues its damages claims are timely because they have
not yet accrued, as Linear has not yet suffered damages.
Alternatively, Linear argues these claims are timely because
it brought suit within three years of the HOA foreclosure
sale. Finally, Linear argues that to the extent a limitation
period has run, it should be equitably tolled.
and Sierra provide no authority for the proposition that the
timeliness of a challenge to an HOA foreclosure sale under
Chapter 116 is governed by the time limits in § 107.080.
That section refers to foreclosures of deeds of trust, not
HOA liens. Nev. Rev. Stat. § 107.080(1). All of the
claims in Linear's complaint are timely because Linear
filed suit within three years of the HOA foreclosure
sale. I therefore deny Leach and Sierra's
motions to dismiss on the basis of untimeliness.
Determine Adverse Interests in Property
one of Linear's complaint seeks to determine whether the
HOA sale extinguished the deed of trust. This is a claim to
determine adverse interests in property under Nevada Revised
Statutes § 40.010. That statute provides that
“[a]n action may be brought by any person against
another who claims an estate or interest in real property,
adverse to the person bringing the action, for the purpose of
determining such adverse claim.”
and Sierra contend this claim should be dismissed against
them because they do not claim an interest in the property.
Sierra also argues this claim fails in terms of its due
responds that Leach and Sierra are proper parties to this
claim because if the HOA sale is unwound, Sierra's
superpriority lien will be reinstated on the property and
Leach will have to refund money it collected from the sale.
Linear contends that if Leach and Sierra are not parties,
then additional litigation would be necessary to settle the
parties' respective rights. It also argues Nevada Revised
Statutes § 116.3116 (as it existed at the time of this
sale) violated the lienholder's due process rights
because it was an unconstitutional opt-in scheme under the
reasoning in Bourne Valley Court Trust v. Wells Fargo
Bank, N.A., 832 F.3d 1154 (9th Cir. 2016).
Alternatively, Linear argues its predecessor's due
process rights were violated as applied because it attempted
to determine and pay the superpriority amount but was
complaint seeks, among other things, a declaration that the
HOA foreclosure sale was void. ECF No. 1 at 18. If the HOA
foreclosure sale is invalidated, Sierra's superpriority
lien might be reinstated as an encumbrance against the
property. Further, the existence and priority of that lien
might still be in doubt because Linear alleges its
predecessor tendered payment of that lien. “The
disposition of this action in the HOA's absence may
impair or impede its ability to protect its interests.”
U.S. Bank, N.A. v. Ascente Homeowners Ass'n, No.
2:15-cv-00302-JAD-VCF, 2015 WL 8780157, at *2 (D. Nev. Dec.
15, 2015). Additionally, if Linear “succeeds in
invalidating the sale without the HOA being a party to this
suit, separate litigation to further settle the priority of
the parties' respective liens and rights may be
necessary.” Id. Thus, if Sierra is dismissed,
Linear would not be able to secure the complete relief it
seeks. See id.; Fed.R.Civ.P. 19(a). Accordingly,
Sierra is a proper party to Linear's quiet title claim,
and its motion to dismiss on this basis is denied.
Leach does not assert an interest in the property and there
are no plausible allegations that it could or would even if
the sale is set aside. There is no allegation that Leach had
a lien on the property. Additionally, although Linear
contends Leach may have to return funds if the sale is
unwound, Leach would not have to return funds to Linear,
because Linear did not pay for the property at the HOA
foreclosure sale. Linear has no standing to invoke another