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Nationstar Mortgage LLC v. 312 Pocono Ranch Trust

United States District Court, D. Nevada

November 13, 2019

NATIONSTAR MORTGAGE LLC, Plaintiff
v.
312 POCONO RANCH TRUST, et al., Defendants

          ORDER (1) DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT AND (2) GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT [ECF NOS. 53, 56]

          ANDREW P. GORDON UNITED STATES DISTRICT JUDGE.

         Plaintiff Nationstar Mortgage LLC sues to determine whether a deed of trust owned by the Federal Home Loan Mortgage Corporation (Freddie Mac) still encumbers property located at 312 Pocono Ranch Avenue following a non-judicial foreclosure sale conducted by the homeowners association (HOA). Defendant 312 Pocono Ranch Trust (Pocono) purchased the property at the foreclosure sale.

         Pocono moves for summary judgment, arguing that Nationstar's declaratory relief claim is untimely because under either federal or state law, a three-year limitation period applies. Nationstar opposes Pocono's motion and moves for summary judgment, arguing its claim is timely and the federal foreclosure bar preserved the deed of trust.

         The parties are familiar with the facts so I do not repeat them here except where necessary. I deny Pocono's motion because Nationstar's declaratory relief claim is timely. I grant Nationstar's motion because the federal foreclosure bar precludes the HOA's foreclosure sale from extinguishing the deed of trust.

         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. Pocono's Motion (ECF No. 53)

         Pocono argues that under either federal or state law, Nationstar's declaratory relief claim is untimely. The HOA sale took place on October 17, 2013 and the deed was recorded on October 28, 2013. ECF No. 56-10. Nationstar filed the complaint on June 28, 2017. ECF No. 1. If the applicable limitation period is four or more years, Nationstar's claims are timely.

         Pocono and Nationstar dispute whether and how 12 U.S.C. § 4617(b)(12) applies to Nationstar's claim. That statute extends the limitation period for claims brought by the Federal Housing Finance Agency (FHFA) as conservator for Freddie Mac. Contract claims must be brought within the longer of six years or the applicable state law period, and tort claims must be brought within the longer of three years or the applicable state law period. 12 U.S.C. § 4617(b)(12)(A). Courts have interpreted § 4617(b)(12) to govern any action brought by FHFA as conservator, and thus one of these two limitation periods must apply even to a claim like Nationstar's declaratory relief claim that is neither a contract nor a tort claim. See FHFA v. UBS Americas Inc., 712 F.3d 136, 144 (2d Cir. 2013); Fed. Hous. Fin. Agency v. LN Mgmt. LLC, Series 2937 Barboursville, 369 F.Supp.3d 1101, 1108-09 (D. Nev. 2019); FHFA v. Royal Bank of Scotland Grp. PLC, 124 F.Supp.3d 92, 95-99 (D. Conn. 2015); FHFA v. HSBC No. Amer. Holdings, Inc., Nos. 11cv6189 (DLC), 11cv6201 (DLC), 2014 WL 4276420, at *5 (S.D N.Y. Aug. 28, 2014); In re Countrywide Fin. Corp. Mortgage-Backed Sec. Litig., 900 F.Supp.2d 1055, 1067 (C.D. Cal. 2012). Pocono and Nationstar agree on this point.

         But they disagree about whether Nationstar's claim is more like a contract claim or more like a tort claim. Pocono argues that Nationstar's claim is essentially for wrongful foreclosure and thus is a tort claim. Nationstar contends that because its security interest in the property is derived from a contract, the six-year limitation period should apply.

         Nationstar's claim is not comparable to wrongful foreclosure. Under Nevada law, a “wrongful foreclosure claim challenges the authority behind the foreclosure, not the foreclosure act itself.” McKnight Family, L.L.P. v. Adept Mgmt., 310 P.3d 555, 559 (Nev. 2013) (en banc). Nationstar's declaratory relief claim does not challenge the HOA's authority or legal right to conduct the foreclosure, and it does not dispute that the homeowner was in default on the HOA assessments. See Collins v. Union Fed. Sav. & Loan Ass'n, 662 P.2d 610, 623 (Nev. 1983) (stating that “the material issue of fact in a wrongful foreclosure claim is whether the trustor was in default when the power of sale was exercised”). Rather, Nationstar concedes the HOA had the authority to foreclose but disputes that the foreclosure extinguished the deed of trust. And Nationstar does not request tort damages.

         A more fitting comparison is to a contract claim. The security interest in the property was established through the deed of trust, which is a contract. See Edelstein v. Bank of New York Mellon, 286 P.3d 249, 254, 258 (Nev. 2012) (en banc). Nationstar's declaratory relief claim seeks to establish whether that security interest still encumbers the property, and thus is more akin to a contract claim than a tort claim. See LN Mgmt. LLC, Series 2937 Barboursville, 369 F.Supp.3d at 1109-10 (reaching the same conclusion). Consequently, if § 4617(b)(12)(A) applies to Nationstar's claim, then the six-year limitation period governs and Nationstar's claim is timely.[1]

         I need not decide whether § 4617(b)(12)(A) applies to Nationstar's claim because even if it does not, the complaint is timely under Nevada law. Although the parties advocate for either a three- or five-year limitation period under Nevada law, I have previously ruled that the four-year catchall limitation period in Nevada Revised Statutes § 11.220 applies to claims brought by a lienholder seeking to determine whether an HOA sale extinguished its deed of trust. See Bank of America, N.A. v. Country Garden Owners Ass'n, 2:17-cv-01850-APG-CWH, 2018 WL 1336721, at *2 (D. Nev. ...


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