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Bank of America, N.A. v. South Valley Ranch Community Association

United States District Court, D. Nevada

September 25, 2019

BANK OF AMERICA, N.A., SUCCESOR BY MERGER TO BAC HOME LOANS SERVICING, LP, Plaintiff,
v.
SOUTH VALLEY RANCH COMMUNITY ASSOCIATION, et al., Defendant.

          ORDER

          Kent J. Dawson United States District Judge

         Presently before the Court is Plaintiff’s Motion for Partial Summary Judgment (#50). Defendant Hitchen Post Dr. Trust (“Hitchen”) filed a response in opposition (#54) to which Plaintiff replied (#59). Defendant South Valley Ranch Community Association (“South Valley”) also filed a Motion for Summary Judgment (#62). Plaintiff filed a response in opposition (#63) to which South Valley replied (#66).

         I. Facts

         Mary Jayne and Charles Swearingen (“Borrowers”) financed their property located at 733 Hitchen Post Drive, Henderson, Nevada with a $140, 409 loan from Countrywide Bank in 2009. They secured the loan with a deed of trust. Later that year, Countrywide merged into and with Plaintiff Bank of America (“BANA”). BANA received its interest as a beneficiary of the deed of trust by an assignment which was recorded on October 20, 2011.

         The property is subject to and governed by the Declaration of Covenants, Conditions and Restrictions and Grant of Easements (“CC&Rs”) for South Valley Ranch Community Association. Eventually, Borrowers defaulted on their obligation to pay assessments of approximately $60 quarterly under the CC&Rs to South Valley. On August 7, 2012, South Valley through its foreclosure agent, Defendant Homeowners Association Services (“HAS”), recorded notice of delinquent assessment lien. HAS recorded notice of default and election to sell on July 17, 2013. The notice stated that Borrowers owed $2, 249.03 plus costs and fees.

         On August 2, 2013, BANA’s counsel offered to pay the superpriority lien and asked for a total. In response, HAS provided an account statement which reflected that Borrowers owed $60 per quarter in assessments. The statement did not indicate that they owed any maintenance or nuisance abatement charges. Based on the ledger, BANA calculated the superpriority amount as $180 (three quarters – or nine months – of annual assessments) and tendered that amount by check to HAS on September 19, 2013. HAS received, but rejected, BANA’s tender.

         Notice of sale was recorded on January 27, 2014. Foreclosure sale was conducted on or about February 13, 2014. Hitchen purchased the property for $21, 100.00. The parties now disagree as to whether South Valley’s foreclosure extinguished BANA’s lien or whether Hitchen purchased the property subject to the lien.

         II. Standard for Summary Judgment

         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.

         III. Analysis

         Bank of America argues that its deed of trust survived South Valley’s nonjudicial foreclosure for five discrete reasons: (1) the bank tendered-or was excused from tendering-the superpriority portion of the HOA lien; (2) the association foreclosed under an unconstitutional version of NRS § 116; (3) the foreclosure sale violated due process as-applied; (4) the Supremacy Clause preempts NRS § 116; and (5) the sale was unfair and should be equitably set aside under Shadow Canyon. Because the Court finds Bank of America’s tender argument dispositive, it need not reach the bank’s other arguments. South Valley, on the other hand, moves for summary judgment on its quiet title claim. It seeks a declaration that South Valley’s foreclosure extinguished both BANA’s and Borrower’s interest in the property. The Court turns first to Bank of America’s motions.

         A. Tender

         Bank of America contends that its attempt to ascertain and pay the superpriority amount of South Valley’s lien constituted valid tender and preserved its deed of trust. The Nevada Supreme Court has addressed whether valid tender preserves a lender’s deed of trust in a series of recent cases. In Bank of America, N.A. v. SFR Invs. Pool 1, LLC, the Court definitively held that a lender’s valid tender prior to the association’s foreclosure preserves the lender’s first deed of trust. 427 P.3d 113, 118 (Nev. 2018) (“Diamond Spur”). Tender is valid if (1) it pays the entire superpriority lien (id. at 117) and (2) it is unconditional or insists only on conditions the tendering party has a right to insist upon (id. at 118). The tendering party is under no obligation to “keep [the tender] good” or deposit the tender into an escrow or court-established account. Id. at 120–21. At bottom, valid tender voids the association’s foreclosure of the superpriority portion of the association’s lien, which results in the buyer taking the property subject to the lender’s first deed of trust. Id. at 121.

         Then, in Bank of America, N.A. v. Thomas Jessup, LLC Series VII, the Nevada Supreme Court reaffirmed the tender rule and carved out an exception where an association makes clear that it will reject tender. 435 P.3d 1217 (Nev. 2019). Thus, a lender can preserve its deed of trust against an association’s foreclosure by calculating the superpriority balance and tendering payment for that amount. Diamond Spur, 427 P.3d at 117. Or, even if money never changes hands, the lender’s deed of trust survives foreclosure if it attempted to tender payment, but the association rejects that payment. Thomas Jessup, 435 P.3d at 1220. This Court has adopted the Nevada Supreme Court’s reasoning. See RH Kids, LLC v. ...


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