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Ditech Financial LLC v. Stonefield II Homeowners Association

United States District Court, D. Nevada

July 3, 2019

DITECH FINANCIAL LLC F/K/A GREEN TREE SERVICING LLC AND FEDERAL NATIONAL MORTGAGE ASSOCIATION, Plaintiff,
v.
STONEFIELD II HOMEOWNERS ASSOCIATION; AIRMOTIVE INVESTMENTS LLC, Defendants. AIRMOTIVE INVESTMENTS, LLC, a Nevada limited liability company, Counterclaimant,
v.
DITECH FINANCIAL LLC f/k/a GREEN TREE SERVICING LLC, a Delaware limited liability company; FEDERAL NATIONAL MORTGAGE ASSOCIATION, a federally chartered corporation; ANA RODRIGUEZ f/k/a ANA PUENTES, an individual, DOE individuals I through XX; and ROE CORPORATIONS I through XX, Counter-Defendants.

          ORDER

          MIRANDA M. DU UNITED STATES DISTRICT JUDGE.

         I. SUMMARY

         In this case, the Court decides whether a first deed of trust (“DOT”) encumbering real property located at 8953 Finnsech Drive, Reno, Nevada 89506, APN 080-883-04 (“Property”) was extinguished by a non-judicial foreclosure sale (“HOA Sale”)-conducted to satisfy a homeowners' association lien. (ECF Nos. 1, 60.) Plaintiffs Ditech Financial LLC f/k/a Green Tree Servicing LLC (“Ditech”) and Federal National Mortgage Association (“Fannie Mae”) (collectively “Plaintiffs”) have moved for summary judgment, seeking quiet title and declaration that the HOA Sale did not extinguish Fannie Mae's DOT because 12 U.S.C. § 4617(j)(3) (“Federal Foreclosure Bar”) preserved it (“Motion”). (ECF No. 60.) The Court agrees with Plaintiffs that the Federal Foreclosure Bar protected the DOT from extinguishment and therefore grants the Motion.[1]

         II. BACKGROUND

         A. Facts

         The following facts are undisputed unless otherwise indicated.[2]

         Ana Puentes (“Borrower”) executed a note (“Note”) and the DOT on March 1, 2007-recorded the following day, in exchange for a $211, 100 loan (“Loan”) from Universal American Mortgage Company, LLC (“Lender”) to finance the Property located within the Stonefield II Homeowners Association (“HOA”). (ECF No. 60-2.) Mortgage Electronic Registration Systems, Inc. (“MERS”) was the nominee-beneficiary on the DOT. (Id.) The DOT also granted Lender a security interest in the Property to secure the repayment of the Loan. (Id. at 4.)

         Plaintiffs have provided the affidavit of Fannie Mae's Assistant Vice President, Graham Babin, and Fannie Mae's business records accompanying Babin's declaration, evidencing that Fannie Mae purchased the Loan in April 2007. (ECF No. 60-3 at 3-4, 7.) Fannie Mae thereby obtained an ownership interest in the DOT at that time.

         Borrower ultimately failed to pay HOA assessments. The HOA recorded a notice of delinquent assessment and claim of lien on December 29, 2010 (ECF No. 60-7); a notice of default and election to sell on January 5, 2012 (ECF No. 60-8); and a notice of the HOA Sale on February 26, 2013 (ECF No. 60-9). Defendant TBR I, LLC (“TBR”) purchased the Property at the HOA Sale held on April 26, 2013, for $3, 941.00. (ECF No. 60-10.) TBR transferred the Property to Defendant/Counterclaimant Airmotive Investments LLC (“Airmotive”) by a quitclaim deed recorded on February 29, 2016. (ECF No. 60-11.)

         Fannie Mae retained its ownership of the Loan-and thus its interest in the DOT- at the time of the HOA Sale. (ECF No. 60-3 at 3-4, 15.) BANA was the servicer of the Loan at that time. (Id. at 4, 21 (documenting servicing transfer from BANA to Ditech on “04/30/2013”).) The FHFA did not consent to the HOA Sale extinguishing or foreclosing Fannie Mae's interests in the Property. (See ECF No. 60-12 (FHFA's website explaining “FHFA confirms that it has not consented, and will not consent in the future, to the foreclosure or other extinguishment of any Fannie Mae or Freddie Mac lien or other property interest in connection with HOA foreclosures of super-priority liens”).)

         B. The Parties' Claims and Motions

         In their first amended complaint (“FAC”), Plaintiffs assert the following claims for relief: (1) declaratory judgment under the Federal Foreclosure Bar against Airmotive; (2) declaratory judgment against all Defendants for violations of due process; (3) quiet title under the Federal Foreclosure Bar against Airmotive; (4) breach of NRS § 116.1113 et seq. against the HOA; (5) wrongful foreclosure against the HOA; and (6) injunctive relief against Airmotive. (ECF No. 27.)[3] Plaintiffs chiefly request that the Court declares that Fannie Mae's DOT continues to encumber the Property because the Federal Foreclosure Bar preempts Nevada Law. (Id. at 17.)

         Airmotive filed two counterclaims: (1) quiet title/declaratory relief against all Counter-Defendants; and (2) negligent or, alternatively, intentional misrepresentation against Ditech. (ECF No. 37.) Airmotive also moved for partial summary judgment on the latter. (ECF No. 70.) This action was thereafter stayed due to bankruptcy proceedings (ECF Nos. 74, 74-1, 75). However, the parties subsequently filed a joint status report informing the Court that progress in the bankruptcy proceedings rendered all but Airmotives' negligent/intentional misrepresentation claim ripe for ruling. (ECF No. 76.) In light of these facts, the Court issue a minute order denying Airmotive's motion for partial summary judgment on its misrepresentation claim “to avoid the motion pending for an indefinite period of time.” (ECF No. 78.) Accordingly, this order concerns only Plaintiffs' Motion, although the Court's ruling in favor of Plaintiffs necessitates dismissal of Airmotive's first counterclaim for quiet title.

         III. ...


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