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Southern Capital Preservation, LLC v. Federal Home Loan Mortgage Corp.

United States District Court, D. Nevada

November 13, 2019

SOUTHERN CAPITAL PRESERVATION, LLC and PAUL PAWLIK, Plaintiffs
v.
FEDERAL HOME LOAN MORTGAGE CORPORATION, et al., Defendants

          ORDER (1) GRANTING IN PART THE PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT, (2) GRANTING FREDDIE MAC'S MOTION FOR SUMMARY JUDGMENT, AND (3) DIRECTING FREDDIE MAC TO FILE A STATUS REPORT REGARDING ITS UNJUST ENRICHMENT CLAIM [ECF NOS. 34, 36]

          ANDREW P. GORDON UNITED STATES DISTRICT JUDGE.

         Plaintiffs Southern Capital Preservation, LLC and Paul Pawlik own as tenants in common property located at 8989 Marmo Avenue in Las Vegas, Nevada. They purchased the property at a nonjudicial foreclosure sale conducted by the homeowners association (HOA). They sue to determine whether the HOA's sale extinguished the deed of trust. Defendant Federal Home Loan Mortgage Corporation (Freddie Mac) asserts counterclaims for a declaration that the deed of trust still encumbers the property and for unjust enrichment.[1]

         The plaintiffs move for summary judgment, arguing they are bona fide purchasers and Freddie Mac cannot resort to equity because it failed to take action to stop the sale. Freddie Mac opposes and moves for summary judgment, arguing that the deed of trust was preserved by the federal foreclosure bar in 12 U.S.C. § 4617(j)(3). The parties are familiar with the facts, and I do not repeat them here except where necessary. I grant the plaintiffs' motion as to defaulted defendant Connie Chen, who was the homeowner before the HOA foreclosure sale. But I deny the plaintiffs' motion as to Freddie Mac and grant Freddie Mac's motion because the federal foreclosure bar preserved the deed of trust as a matter of law. Finally, neither party addressed Freddie Mac's unjust enrichment counterclaim, and that counterclaim is not explicitly pleaded in the alternative to the declaratory relief claim. I therefore direct Freddie Mac to file a status report regarding whether it intends to pursue that claim further.

         I. ANALYSIS

         Summary judgment is appropriate if the movant shows “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a), (c). A fact is material if it “might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute is genuine if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id.

         The party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and identifying those portions of the record that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The burden then shifts to the non-moving party to set forth specific facts demonstrating there is a genuine issue of material fact for trial. Fairbank v. Wunderman Cato Johnson, 212 F.3d 528, 531 (9th Cir. 2000); Sonner v. Schwabe N. Am., Inc., 911 F.3d 989, 992 (9th Cir. 2018) (“To defeat summary judgment, the nonmoving party must produce evidence of a genuine dispute of material fact that could satisfy its burden at trial.”). I view the evidence and reasonable inferences in the light most favorable to the non-moving party. James River Ins. Co. v. Hebert Schenk, P.C., 523 F.3d 915, 920 (9th Cir. 2008).

         A. Defendant Chen

         The plaintiffs move for judgment as to all defendants. ECF No. 34 at 1. Defendant Chen previously defaulted in this case and she did not respond to the plaintiffs' motion. She therefore has not pointed to evidence that would (1) counter the plaintiffs' evidence and the presumption that the HOA sale was properly conducted, (2) overcome the presumption in favor of the plaintiffs as titleholders of record, or (3) otherwise support setting aside the sale as to her. See Nationstar Mortg., LLC v. Saticoy Bay LLC Series 2227 Shadow Canyon, 405 P.3d 641, 646 (Nev. 2017). I therefore grant the plaintiffs' motion as to Chen.

         B. Defendant Freddie Mac

         The federal foreclosure bar in 12 U.S.C. § 4617(j)(3) provides that “in any case in which [the Federal Housing Finance Agency (FHFA)] is acting as a conservator, ” “[n]o property of [FHFA] shall be subject to ... foreclosure[ ] or sale without the consent of [FHFA].” Freddie Mac argues that under the federal foreclosure bar, the HOA sale could not extinguish its interest in the property because at the time of the sale, FHFA was acting as Freddie Mac's conservator and Freddie Mac owned an interest in the property.

         The question of whether the federal foreclosure bar applies to preserve Freddie Mac's interest in this property following the HOA's foreclosure sale of its superpriority lien is controlled by Berezovsky v. Moniz, 869 F.3d 923 (9th Cir. 2017). In that case, the Ninth Circuit held that the federal foreclosure bar preempts Nevada law and precludes an HOA foreclosure sale from extinguishing Freddie Mac's interest in property without FHFA's affirmative consent. Id. at 927-31.

         The plaintiffs offer a variety of arguments as to why the federal foreclosure bar should not operate to preserve the deed of trust in this case. None of those arguments precludes summary judgment in Freddie Mac's favor, however.

         1. Freddie Mac Did Not Have to Record Its Interest

         The plaintiffs argue that Freddie Mac had to record its interest for it to be enforceable against third parties like the plaintiffs. However, both the Supreme Court of Nevada and the Ninth Circuit have rejected similar arguments. See Fed. Home Loan Mortg. Corp. v. SFR Invs. Pool 1, LLC, 893 F.3d 1136, 1149-50 (9th Cir. 2018); Berezovsky, 869 F.3d at 932; Daisy Tr. v. Wells Fargo Bank, N.A., 445 P.3d 846, 849 (Nev. 2019) (en banc); SFR Invs. Pool 1, LLC v. Green Tree Servicing, LLC, No. 72010, 432 P.3d 718, 2018 WL ...


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