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U.S. Bank, N.A. v. SFR Investments Pool I, LLC

United States District Court, D. Nevada

September 19, 2019

U.S. BANK, N.A., Plaintiff,
v.
SFR INVESTMENTS POOL 1, LLC, et al., Defendants.

          ORDER

          KENT J. DAWSON UNITED STATES DISTRICT JUDGE

         Presently before the Court is Defendant SFR Investments Pool 1, LLC’s Motion for Summary Judgment (#68). Plaintiff U.S. Bank filed a response in opposition (#73) to which Defendant SFR replied (##76). Defendant White Horse Estates Homeowners Association joined (#74) SFR’s motion.

         Also before the Court is Plaintiff U.S. Bank’s Motion for Summary Judgment (#72). Defendant SFR filed a response in opposition (#75) to which Plaintiff replied (#77).

         This is a quiet title action arising out of the non-judicial foreclosure of real property located at 6353 Ebony Legends Avenue, Las Vegas, Nevada 89131 (“the Property”). U.S. Bank seeks a declaration that the White Horse Estates Homeowners Association (“HOA”) foreclosure did not extinguish its deed of trust under two theories. First, the bank argues that the Court should set aside the HOA sale because the sale price was grossly inadequate and because the HOA acted unfairly while carrying out its pre-foreclosure actions. Alternatively, it claims that the HOA’s foreclosure under NRS § 116 is invalid because the statute is unconstitutional. The bank’s principal argument is that § 107.090’s notice requirements-as incorporated-do not adequately warn subordinate lienholders that an HOA foreclosure threatens to extinguish their deeds of trust. SFR also moved for summary judgment.

         Like U.S. Bank, SFR seeks to quiet title in the Property and requests a declaration that it purchased the Property free and clear of the bank’s deed of trust. SFR argues that § 116 is constitutional and that the HOA sale was not commercially unreasonable. The Court agrees and therefore grants SFR Investments Pool’s motion for summary judgment (#68). Consequently, the Court denies U.S. Bank’s motion for summary judgment (#72).

         I. Facts

         Former owner and non-party Tricia Thoen purchased the Property in May 2005. (#68 at Ex. 5). Thoen financed the purchase with a $479, 920.00 loan, secured by a deed of trust dated June 7, 2005. The deed of trust in favor of Meridias Capital, Inc. contained a Planned Unit Development Rider, prepared by the lender and signed by Thoen. (Id. at Ex. 7). The Rider recognized the need to pay assessments to the HOA and the ability of the lender to pay the assessments if Thoen defaulted. Id.

         On May 23, 2006, a deed was filed with the Clark County Recorder’s office transferring Thoen’s interest to Cross-Defendant MAT Holdings, LLC (“MAT”). (Id. at Ex. 10). On April 1, 2009, MAT became delinquent on payments on the deed of trust. On August 18, 2009, Recontrust Company, N.A., acting on behalf of beneficiary recorded Notice of Default and Election to Sell. On September 8, 2009, the deed of trust was assigned by Mortgage Electronic Registration Systems, Inc. to BAC Home Loans Servicing, LP. On July 27, 2010, Fidelity National Title was substituted for Recontrust as trustee under the deed of trust. On September 9, 2010, the HOA recorded Notice of Delinquent Assessment Lien, which was released on April 28, 2011 after the HOA received payment for the entire amount. On December 28, 2011, the HOA recorded a second Notice of Delinquent Assessment Lien, stating that MAT owed $2, 677.24 in past due assessments, late fees and interest. On February 23, 2012, the HOA, through its agent Nevada Association Services (“NAS”) recorded a Notice of Default and Election to Sell under the second lien, stating that MAT now owed $3, 854.72.

         The servicers of the loan at the time, Bank of America, N.A. (“BANA”), offered to pay the super-priority amount, including nine months of assessments. BANA’s counsel contacted the HOA to pay the delinquent assessments. BANA then paid the full amount of $3, 854.72. The HOA then released the second lien on or about October 22, 2012. On or about August 29, 2012, the first deed of trust was assigned from BANA to Plaintiff U.S. Bank.

         On March 26, 2013, the Association, through its agent NAS, recorded a third Notice of Delinquent Assessment Lien (“the Operative Lien”). The Operative Lien stated that MAT now owed $1, 429.58. On June 11, 2013, NAS, as agent for the HOA, recorded a Notice of Default and Election to Sell in order to satisfy the Operative Lien. The notice stated that the amount due the HOA was $2, 740.49. (#68 at Ex. 24). A Notice of Foreclosure Sale was recorded on or about October 11, 2013. The foreclosure sale was scheduled for November 1, 2013. Defendant SFR bid the highest amount at the foreclosure sale. The Foreclosure Deed was recorded on November 6, 2013 stating that the sale price was $25, 000.00. The Deed estimated that the value of the Property was $308, 823.00.

         U.S. Bank[1] then brought this action. The bank primarily seeks to quiet title in the Property. (#1 at 6). To do so, the bank seeks a declaration that the HOA acted unfairly in its foreclosure sale or NRS § 116 is facially unconstitutional, either of which would invalidate the HOA’s foreclosure. In response, SFR asserted its own quiet title claim against U.S. Bank, MAT, and Meridias (#11). In addition, SFR sought to enjoin U.S. Bank from asserting any interest in the Property. The Court then stayed the case following the Ninth Circuit’s decision in Bourne Valley Court Trust v. Wells Fargo Bank, N.A., 832 F.3d 1154 (9th Cir. 2016). (#63). The Court lifted the stay in October of 2018 and set the dispositive-motion deadline. (#67). Discovery has since closed, and the parties have filed their respective motions for summary judgment to which the Court now turns.

         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); Northwest Motorcycle Ass’n v. U.S. Dept. of Agriculture, 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.

         III. Analysis

         U.S. Bank moves for summary judgment on its quiet title claim arguing that (1) the inherent unfairness of the sale coupled with the Property’s sale price justify setting aside the HOA sale and (2) the HOA foreclosed under an unconstitutional statute thereby preserving the bank’s interest in the Property.

         SFR also seeks summary judgment on its own quiet title claim and argues that U.S. Bank lacks standing because it has not provided evidence of the assignments of the deed of trust sufficient to prove the bank’s chain of title. It continues that even if the bank has standing, NRS § 116 is both facially constitutional and constitutional as applied to U.S. Bank. SFR contends that the bank received adequate notice to apprise it of the risk to the bank’s property interest and to allow the bank to contest the sale. Finally, SFR argues that U.S. Bank has not demonstrated the necessary fraud, oppression, or unfairness that would justify equitably setting aside the sale.

         A. U.S. Bank’s Motion ...


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