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Bank of New York Mellon v. Khosh

United States District Court, D. Nevada

May 30, 2019

THE BANK OF NEW YORK MELLON FKA THE BANK OF NEW YORK, AS TRUSTEE FOR THE CERTIFICATEHOLDERS OF CWALT, INC., ALTERNATIVE LOAN TRUST 2005-54CB, Plaintiff,
v.
AMIR A. KHOSH; SFR INVESTMENTS POOL 1, LLC; ARBOR PARK COMMUNITY ASSOCIATION; DOE INDIVIDUALS I-X, inclusive, and ROE CORPORATIONS I-X, inclusive, Defendants. SFR INVESTMENTS POOL 1, LLC, Counter/Crossclaimant,
v.
THE BANK OF NEW YORK MELLON FKA THE BANK OF NEW YORK, AS TRUSTEE FOR THE CERTIFICATEHOLDERS OF CWALT, INC., ALTERNATIVE LOAN TRUST 2005-54CB; ACCREDITED HOME LENDERS, INC.; AMIR A. KHOSH, an individual, Counter/Crossdefendants.

          ORDER

          MIRANDA M. DU UNITED STATES DISTRICT JUDGE

         I. SUMMARY

         This dispute arises from the foreclosure sale (“HOA Sale”) of real property located at 5409 Orchid Lilly Court, North Las Vegas, NV 89031 (“Property”) to satisfy a homeowners' association lien. Two motions are currently pending before the Court. In the first motion, Plaintiff/Counter-Defendant The Bank of New York Mellon fka The Bank of New York, as Trustee for the Certificateholders of CWALT, Inc., Alternative Loan Trust 2005-54CB, Mortgage Pass-Through Certificates, Series 2005-54CB (“BoNYM”), moves for summary judgment on its claim that its deed of trust (“DOT”) survived the HOA Sale. (ECF No. 62.) In the second motion, Counterclaimant/Cross-Claimant SFR Investments Pool 1, LLC (“SFR”) moves for summary judgment on BoNYM's claims and on its counterclaims for declaratory relief/quiet title and injunction against BoNYM, and Cross-Defendants Amir A. Khosh (“Khosh” or “Borrower”), and Accredited Home Lenders, Inc. (“AHL”).[1] (ECF No. 64; ECF No. 37 at 11-18.) For the reasons stated below, the Court grants SFR's motion for summary judgment (“MSJ”) and therefore denies BoNYM's MSJ.[2]

         II. BACKGROUND

         The following facts are undisputed unless otherwise indicated.[3]Amir A. Khosh (“Borrower”) financed the purchase of the Property within the HOA with a $256, 500.00 loan (“Loan”) from Quicken Loans Inc. (“Quicken”) in July 2005. (ECF No. 62-1.) The Loan was secured by a first deed of trust (“DOT”) and Mortgage Electronic Registration Systems, Inc. (“MERS”) was the named beneficiary of the DOT. (See id.) MERS as nominee for Quicken assigned the DOT to BoNYM in an assignment recorded on March 25, 2011. (ECF Nos. 62-2; 69-2.) BoNYM is the current beneficiary under the DOT. (Id.; ECF No. 62-3.)

         Borrower failed to pay HOA assessments, and the HOA recorded the following notices through its agent, Absolute Collection Services, LLC (“Absolute”): (1) notice of delinquent assessment lien on September 22, 2011 (“First NDAL”) (ECF No. 62-4); and (2) notice of default and election to sell on January 6, 2012 (ECF No. 62-5).

         On February 2, 2012, Bank of America, N.A. (“BANA”)-acting as BoNYM's loan servicer-sent a letter to Absolute through its agent (the law firm of Miles, Bauer, Bergstrom & Winters, LLP (“Miles Bauer”)) offering to pay the superpriority amount of the HOA's lien. (ECF No. 62-7 at 3-5.) Absolute responded stating: “We recognize your client's position as the first mortgage company as the senior lien holder. Should you provide us with a recorded Notice of Default or Notice of Sale, we will hold our action so your client may proceed.” (Id. at 6.) BANA thereafter paid the entire lien amount owed at the time. (ECF No. 62-8 at 7.)

         The HOA recorded a second notice of delinquent assessment lien against the Property on January 10, 2013 (“Second NDAL”), providing Borrower owed $1, 286.22 in overdue assessments and other amounts. (ECF No. 62-9.) On April 4, 2013, the HOA recorded a second notice of default and election to sale against the Property, alleging Borrower owed $2, 120.52. (ECF No. 62-10.) The HOA recorded a notice of trustee's sale against the Property on August 2, 2013, noting Borrower owed an estimated $3, 987.44 (ECF No. 62-11.) SFR purchased the Property at HOA Sale on September 17, 2013, for $14, 000.00. (ECF No. 62-12.)[4]

         In its First Amended Complaint (“FAC”), BoNYM asserted the following claims: (1) declaratory judgment against all Defendants that the DOT encumbers the Property, or alternatively that the HOA Sale was void; (2) declaratory relief against all Defendants that BoNYM may judicially foreclose under the DOT; (3) judicial foreclosure against all Defendants; and (4) in the alternative for breach of contract against Borrower. (ECF No. 12.) As noted, SFR asserts counterclaims for declaratory relief/quiet title and preliminary/permanent injunctive relief. (ECF No. 37 at 11-18.)

         III. LEGAL STANDARD

         “The purpose of summary judgment is to avoid unnecessary trials when there is no dispute as to the facts before the court.” Nw. Motorcycle Ass'n v. U.S. Dep't of Agric., 18 F.3d 1468, 1471 (9th Cir. 1994). Summary judgment is appropriate when the pleadings, the discovery and disclosure materials on file, and any affidavits “show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). An issue is “genuine” if there is a sufficient evidentiary basis on which a reasonable fact-finder could find for the nonmoving party and a dispute is “material” if it could affect the outcome of the suit under the governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

         The moving party bears the burden of showing that there are no genuine issues of material fact. Zoslaw v. MCA Distrib. Corp., 693 F.2d 870, 883 (9th Cir. 1982). Once the moving party satisfies Rule 56's requirements, the burden shifts to the party resisting the motion to “set forth specific facts showing that there is a genuine issue for trial.” Anderson, 477 U.S. at 256. The nonmoving party “may not rely on denials in the pleadings but must produce specific evidence, through affidavits or admissible discovery material, to show that the dispute exists, ” Bhan v. NME Hosps., Inc., 929 F.2d 1404, 1409 (9th Cir. 1991), and “must do more than simply show that there is some metaphysical doubt as to the material facts.” Orr v. Bank of Am., NT & SA, 285 F.3d 764, 783 (9th Cir. 2002) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986)). “The mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient.” Anderson, 477 U.S. at 252. Moreover, a court views all facts and draws all inferences in the light most favorable to the nonmoving party. Kaiser Cement Corp. v. Fischbach & Moore, Inc., 793 F.2d 1100, 1103 (9th Cir. 1986).

         IV. DISCUSSION

         As pertinent to BoNYM's MSJ, the Court deems the FAC as chiefly seeking to quiet title, although BoNYM describes the claims as declaratory relief/judgment claims. As the parties note, declaratory judgment or relief is not a standalone claim. (ECF No. 64 at 8; ECF No. 71 at 2-5.). The FAC also supports that BoNYM really intends to have the Court quiet title in its favor. (See, e.g., ECF No. 22 at 10 (“Equally, to the extent the Court determines a five year statute of limitations exists to quiet title, the Court should find that SFR's failure to quiet title precludes it from ever quieting title in its name or otherwise extinguishing the deed of trust, thereby confirming BNY's right to foreclose.”).)

         The Court begins by addressing SFR's contention that BoNYM lacks Article III and prudential standing and its claims and defenses are time-barred. (ECF No. 64 at 7-10, 15-17; ECF No. 69 at 4.) The Court will then address the merits of the parties' arguments. Upon considering these matters, the Court finds that BoNYM's claims and defenses are not time-barred but nonetheless BoNYM's claims fail on the merits.

         A. Standing

         Among BoNYM's arguments on the merits, discussed infra, is its contention that NRS § 116.3116 is unconstitutional. SFR argues that BoNYM lacks Article III and prudential standing to challenge NRS § 116.3116 on due process grounds because BoNYM received actual notice of the HOA Sale and thus cannot claim it was injured and because BoNYM did not produce, inter alia, the original wet-ink promissory note and evidence of payment for the DOT. (ECF No. 64 at 15-17; ECF No. 69 at 4-7.) BoNYM counters that it has standing as the record beneficiary of the DOT to establish its interest in the Property and seek quiet title/declaratory relief. (ECF No. 71 at 6-7.)

         The Court agrees with BoNYM. First, the Court has previously found meritless the same Article III standing-argument SFR makes here. See, e.g., PennyMac Loan Serv. LLC v. Townhouse Greens Ass'n, Inc., No. 3:16-cv-00504-MMD-VPC, 2018 WL 772089, at **2-3 (D. Nev. Feb. 6, 2018) (finding standing because it is alleged that there is injury “by the extinguishment of the DOT and a decision from this Court quieting title to it would redress that injury”). Second, prudential standing exists were BoNYM is the current recorder beneficiary of the DOT and SFR has produced no evidence to the contrary. See, e.g., Freedom Mortg. Corp. v. Las Vegas Dev. Grp., LLC, 106 F.Supp.3d 1174, 1179 (D. Nev. 2015) (internal quotation and citation omitted) (explaining that prudential standing “encompasses the general prohibition on a litigant's raising another person's legal rights, the rule barring adjudication of generalized grievances more appropriately addressed in ...


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