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Wells Fargo Bank, N.A. v. Chestnut Bluffs Avenue Trust

United States District Court, D. Nevada

September 30, 2019





         Before the Court is Plaintiffs Federal National Mortgage Association (“Fannie Mae”) and Wells Fargo Bank, N.A.'s (“Wells Fargo) Joint Motion for Partial Summary Judgment and Defendant Chestnut Bluffs Avenue Trust's (“Chestnut”) Motion to Dismiss. ECF Nos. 36, 38. For the following reasons, the Court grants Plaintiffs' Motion and denies Defendant's motion.


         Plaintiffs Fannie Mae and Well Fargo filed their complaint against Defendants Chestnut Bluffs Avenue Trust, Nevada Association Services, Inc., (“NAS”) and Copper Ridge Community Association (the “HOA”) on May 11, 2017. ECF No. 1. The complaint sought a declaration that Plaintiffs' deed of trust survived a nonjudicial foreclosure sale on a Las Vegas property conducted under Chapter 116 of the Nevada Revised Statutes (“NRS”). To that end, the complaint asserted causes of action for declaratory relief, quiet title, due process violations, wrongful foreclosure, statutory violations of NRS 116, and unjust enrichment. Id. The HOA filed its answer on September 7, 2017. ECF No. 25. On June 4, 2018, the Court so-ordered Wells Fargo's stipulation to dismiss its claims with prejudice against the HOA. ECF No. 31. Chestnut filed its answer on June 11, 2018. ECF No. 32. On September 14, 2018, Plaintiffs filed a motion for summary judgment. ECF No. 36. The motion was fully briefed. ECF Nos. 37, 44. Chestnut filed a motion to dismiss on October 25, 2018. ECF No. 38. That motion was also fully briefed. ECF Nos. 43, 45. On July 10, 2019, the Federal Finance Housing Agency (“FHFA”) filed an amicus brief in support of Plaintiffs. ECF No. 49.


         Plaintiffs allege the following facts.[1]

         a. Alleged Facts

          This matter concerns a nonjudicial foreclosure on a property located at 2255 Chestnut Bluffs Avenue, Henderson, Nevada 89052 (the “property”). The property sits in a community governed by the HOA. The HOA requires its community members to pay HOA dues.

         Nonparties Robert and Nancy Fortunato borrowed funds from Ohio Savings Bank to purchase the property in 2005. To obtain the loan, the Fortunatos executed a promissory note and a corresponding deed of trust to secure repayment of the note. The deed of trust, which lists the Fortunatos as the borrowers, Ohio Savings Bank as the lender, and Mortgage Electronic Registration Systems, Inc. (“MERS”) as the beneficiary of record, was recorded on or about September 23, 2005. On or about October 3, 2011, an assignment of the deed of trust from MERS to Wells Fargo was recorded.

         The Fortunatos fell behind on their HOA payments. From September 2, 2010 through February 24, 2012, the HOA, through its agent NAS, recorded a notice of delinquent assessment lien, followed by a notice of default and election to sale, and finally a notice of foreclosure sale against the property for past-due assessments. On May 11, 2012, Chestnut purchased the property for $6, 000, as recorded on May 17, 2012.

         However, Fannie Mae previously purchased the note and the deed of trust in 2005. While its interest was never recorded under its name, Fannie Mae continued to maintain its ownership of the note and the deed of trust at the time of the foreclosure. Wells Fargo serviced the note and was listed as the record beneficiary at the time of the foreclosure sale.

         The relationship between Fannie Mae and its servicers, is governed by Fannie Mae's Single-Family Servicing Guide (“the Guide”). The Guide provides that servicers may act as record beneficiaries for deeds of trust owned by Fannie Mae. It also requires that servicers assign the deeds of trust to Fannie Mae on Fannie Mae's demand. The Guide states:

The servicer ordinarily appears in the land records as the mortgagee to facilitate performance of the servicer's contractual responsibilities, including (but not limited to) the receipt of legal notices that may impact Fannie Mae's lien, such as notices of foreclosure, tax, and other liens. However, Fannie Mae may take any and all action with respect to the mortgage loan it deems necessary to protect its ... ownership of the mortgage loan, including recordation of a mortgage assignment, or its legal equivalent, from the servicer to Fannie Mae or its designee. In the event that Fannie Mae determines it necessary to record such an instrument, the servicer must assist Fannie Mae by [ ] preparing and ...

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