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Deutsche Bank National Trust Co. v. SFR Investments Pool 1, LLC

United States District Court, D. Nevada

September 9, 2019

DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee, Plaintiff/Counter-defendant,
v.
SFR INVESTMENTS POOL 1, LLC, et al., Defendants.

          ORDER

          Kent J. Dawson United States District Judge.

         Before the Court are three pending motions for summary judgment. Defendant Northbrook Homeowners Association moved first (#61). Plaintiff/Counter-defendant Deutsche Bank (#69) and Defendant SFR Investments Pool 1, LLC (#68) responded, and Northbrook replied to each response (## 75, 76). Next, Deutsche Bank moved for summary judgment (#66) to which SFR Investments (#71) and Northbrook (#72) responded, and Deutsche Bank replied (#77). Last, Defendant/Counterclaimant SFR Investments moved for summary judgment. Deutsch Bank responded (#70), and SFR Investments replied (#78).

         This is a dispute over who holds the superior interest in a property located at 4401 Sparkle Crest Avenue in North Las Vegas, Nevada. Deutsche Bank and SFR Investments each claim to be the rightful owners of the property-Deutsche Bank by virtue of a lender's deed of trust and SFR Investments by virtue of foreclosure and sale. Northbrook and its agent Homeowners Association Services, Inc., on the other hand, do not assert an interest in the property. Those entities nonjudicially foreclosed on the Sparkle Crest property and argue that the foreclosure extinguished Deutsche Bank's deed of trust. Jesse and Lorraine Dahilig were the former owners of the property. They have not participated in this suit and do not claim an interest in the property.

         The quiet title action between SFR Investments and Deutsche Bank boils down to the constitutionality of the notice provisions in NRS § 116.3116(2). SFR Investments and Northbrook both claim that the bank received adequate notice of the association's impending foreclosure. As a result, they argue that SFR Investments purchased the Sparkle Crest property free of Deutsche Bank's deed of trust. Deutsche Bank, on the other hand, urges the Court to find NRS § 116.3116(2) unconstitutional like the Ninth Circuit did in Bourne Valley Court Tr. v. Wells Fargo Bank, N.A., 832 F.3d 1154, 1158 (9th Cir. 2016). Under Bourne Valley, the bank argues, Northbrook's foreclosure could not have extinguished its deed of trust because the foreclosure itself was based upon an unconstitutional statute.

         However, both the Nevada Supreme Court and the Ninth Circuit have squarely rejected Deutsche Bank's constitutional argument. The evidence shows that Deutsche Bank made no attempt to protect its deed of trust in the face of Northbrook's impending foreclosure, despite receiving multiple notices of that foreclosure. There is no dispute that Northbrook recorded the proper notices before the foreclosure and even mailed those notices to both the Dahiligs and to Deutsche Bank. Yet, neither the bank nor the Dahiligs attempted to cure Northbrook's lien. Therefore, the Court grants SFR Investments' and Northbrook's respective motions and finds that Northbrook's nonjudicial foreclosure and SFR Investments subsequent purchase of the Sparkle Creek property extinguished Deutsche Bank's deed of trust.

         I. Background

         The basic facts in this case are undisputed. In 2005, Jesse and Lorraine Dahilig purchased a property located at 4401 Sparkle Crest Avenue in North Las Vegas, Nevada. Deed of Trust, ECF No. 66 Ex. A-2. Ameriquest Mortgage Company financed the purchase and secured its interest in the property by deed of trust. Id Ameriquest later assigned its interest to Deutsche Bank. Assignment of DOT, ECF No. 66 Ex. A-3.

         The Sparkle Crest property belonged to the Northbrook Homeowners Association and was subject to the association's Covenants, Conditions, and Restrictions (“CC&R's”). The CC&Rs required the Dahiligs to pay monthly assessments for maintenance and general community upkeep. Eventually, the Dahiligs fell behind on their monthly assessments. Northbrook attempted to recover the delinquency from the Dahiligs to no avail. In January of 2010, Northbrook, through its agent Homeowner Association Services, recorded a notice of lien-assessment claim. ECF No. 67 Ex. A-6. Northbrook also mailed the notice to the Dahiligs. The notice identified a past-due balance of $671.00. Id. The Dahiligs did not cure the delinquency. Northbrook then recorded a Notice of Default and Election to Sell under the deed of trust. Notice of Default, ECF No. 67 Ex. A-7. In addition to recording the Notice of Default, Northbrook sent it to the Dahiligs and to Deutsche Bank by certified mail. Id. Neither the Dahiligs nor Deutsche Bank cured the delinquency, so the association foreclosed on the Sparkle Crest property. Notice of Trustee's Sale, ECF No. 67 Ex. A-10. On September 23, 2014, SFR Investments purchased the Sparkle Crest property for $21, 000 at a trustee's sale. Deed Upon Sale, ECF No. 67 Ex. B-2.

         On February 10, 2017, Deutsche Bank filed this complaint to quiet title in the property. The complaint alleged five causes of action split between SFR Investments, Northbrook, and Homeowner Association Services: (1) quiet title and declaratory relief under 28 U.S.C. § 2201 and NRS §§ 30.010, 40.010 against each defendant; (2) declaratory relief under the Fifth and Fourteenth Amendments against each defendant; (3) quiet title under the Fifth and Fourteenth Amendments against SFR Investments; (4) preliminary and permanent injunction against SFR Investments; and (5) unjust enrichment against SFR Investments. Compl., ECF No. 1. SFR Investments answered the complaint and asserted its own quiet title and injunctive-relief claims against Deutsche Bank and former-owners Jesse and Lorraine Dahilig. Answer, ECF No. 14. Despite being properly served (ECF No. 63), the Dahiligs have not participated in this suit, and the Court Clerk has entered default against them. ECF No. 65.

         In July of 2018, the Court stayed the case pending the Nevada Supreme Court's clarification of NRS § 116.3116's notice requirements. At the time the Court stayed this case, the Ninth Circuit had definitively held that § 116.3116(2) was facially unconstitutional because it required lenders to affirmatively request notice that their property interests were in danger. Bourne Valley Court Tr. v. Wells Fargo Bank, N.A., 832 F.3d 1154, 1158 (9th Cir. 2016). Shortly thereafter, the Nevada Supreme Court determined that § 116.31168 incorporated the notice provisions found in NRS § 107.090, which required notice to any person whose interest was threatened by foreclosure. SFR Invs. Pool 1, LLC v. Bank of New York Mellon, 422 P.3d 1248, 1252 (Nev. 2018) (“Star Hill”). Incorporation of § 107.090 eliminated the unconstitutional opt-in notice scheme.

         The Court lifted the stay after the Nevada Supreme Court issued Star Hill and allowed the parties forty-five days to renew their dispositive motions. Order Lifting Stay, ECF No. 60. Deutsche Bank, SFR Investments, and Northbrook timely moved for summary judgment. Their motions are fully briefed, and the Court now turns to their merits.

         II. Legal Standard

         The purpose of summary judgment is to avoid unnecessary trials by disposing of factually unsupported claims or defenses. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986); Nw. Motorcycle Ass'n v. U.S. Dept. of Agric., 18 F.3d 1468, 1471 (9th Cir. 1994). It is available only where the absence of material fact allows the Court to rule as a matter of law. Fed.R.Civ.P. 56(a); Celotex, 477 U.S. at 322. Rule 56 outlines a burden shifting approach to summary judgment. First, the moving party must demonstrate the absence of a genuine issue of material fact. The burden then shifts to the nonmoving party to produce specific evidence of a genuine factual dispute for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). A genuine issue of fact exists where the evidence could allow “a reasonable jury [to] return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The Court views the evidence and draws all available 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). Yet, to survive summary judgment, the nonmoving party must show more than “some metaphysical doubt as to the material facts.” Matsushita, 475 U.S. at 586.

         Where parties have filed competing motions for summary judgment, the Court must review each motion on its own merits. Fair Housing Council of Riverside Cty., Inc. v. Riverside Two, 249 F.3d 1132, 1136 (9th Cir. 2001). In reviewing each motion, the Court views the evidence and makes all available inference in favor non-moving party. See Kaiser Cement Corp., 793 F.2d at 1103. At bottom, a party does not prevail on summary judgment solely because the other party did not prevail. See Riverside Two, 249 F.3d at 1136.

         III. Analysis

         Of the three pending motions, only Deutsche Bank and SFR Investments seek quiet title and declaratory judgments. Northbrook, on the other hand, seeks summary judgment because it does not assert an interest in the property. Because it asserts no interest, it argues, the bank's quiet title claims against the association must fail. The Court will first evaluate Deutsche Bank's motion because it presents the threshold question whether NRS § 116.3116 employed an unconstitutional notice scheme. If so, both NRS ...


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