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The Bank of New York Mellon v. Hillcrest At Summit Hills Homeowners Association

United States District Court, D. Nevada

January 13, 2020

THE BANK OF NEW YORK MELLON, as Trustee, Plaintiff,


          Kent J. Dawson, United States District Judge.

         Before the Court are three motions for summary judgment. The first was filed by defendants and counterclaimants, the Edward Kielty Trust, Abigail Sarceno Avila, Maria Aguirre, Ever Atilio Lozano-Membreno, Zoila Angelica Membreno, and Edward and Mary Kielty[1] (ECF No. 96). Plaintiff, the Bank of New York Mellon, responded (ECF No. 106), and the Trust defendants replied (ECF No. 110).

         Next, the Bank of New York Mellon moved for summary judgment (ECF No. 97). Both the Edward Kielty Trust defendants and co-defendant Hillcrest at Summit Hills Homeowners Association responded (ECF Nos. 103, 104). BNY Mellon replied (ECF No. 114).

         Finally, Hillcrest at Summit Hills Homeowner Association moved for summary judgment (ECF No. 98). BNY Mellon responded (ECF No. 105), and Hillcrest replied (ECF No. 115).

         Both BNY Mellon and the Edward Kielty Trust claim an interest in a home located at 2216 Calm Sea Avenue in Las Vegas, Nevada. BNY Mellon claims that it holds the superior interest in the property by virtue of a lender's deed of trust. The Trust argues that it purchased the property free and clear of the bank's interest after a lawful nonjudicial foreclosure extinguished the lender's deed of trust. Hillcrest, on the other hand, does not claim an interest in the property. Rather, Hillcrest seeks vindication that its foreclosure was lawful and that it did not deceive BNY Mellon during the foreclosure process.

         BNY Mellon contends that Hillcrest's foreclosure did not extinguish its property interest because the bank's predecessor-in-interest tendered the superpriority lien balance before foreclosure. Hillcrest rejected that payment. Although proper foreclosure of a superpriority lien extinguishes even a lender's first deed of trust, tender of the outstanding superpriority lien before the foreclosure preserves that interest. That is what happened here. BNY Mellon tendered the entire superpriority balance before foreclosure. Hillcrest's agent, Nevada Association Services, rejected that payment and foreclosed anyway. Because BNY Mellon cured Hillcrest's superpriority lien, the association could only foreclose on the subpriority piece of its lien, which it then conveyed to the Edward Kielty Trust. As a result, the Trust took the property subject to BNY Mellon's valid deed of trust. Accordingly, the Court grants BNY Mellon's motion for summary judgment against the Edward Kielty Trust, denies the Trust's countermotion for summary judgment and denies as moot the bank's remaining claims against Hillcrest.

         I. Background

         The facts in this case follow a familiar pattern of nonjudicial foreclosures. In 2001, nonparty Denise Hookfin purchased the home at 2216 Calm Sea Avenue for $111, 000. See Deed of Sale, ECF No. 96-B. Six years later, Hookfin refinanced the property. The refinance deed of trust listed Hookfin as borrower, Mortgage Solutions Management, Inc. as lender, and Mortgage Electronic Registration Systems, Inc. (“MERS”) as beneficiary under the deed of trust. See Deed of Trust 1-2, ECF No. 96-C. MERS later assigned its interest to plaintiff BNY Mellon, who brought this suit. Corp. Assignment of DOT, ECF No. 96-D.

         From the time of sale to present, the property has been part of the Hillcrest at Summit Hills Homeowner Association and is subject to the association's Covenants, Conditions, and Restrictions (“CC&Rs”). See Hillcrest CC&Rs, ECF No. 96-A. Among those conditions was the owner's responsibility to pay monthly assessments for general upkeep and shared community maintenance. Id. at 15. At some point, Hookfin fell behind on her assessments. That prompted Hillcrest to begin collection actions against Hookfin. In October of 2011, Hillcrest's agent, Taylor Association Management, recorded a Notice of Delinquent Assessment Lien against the property. See Assessment Lien, ECF No. 96-E. The lien identified Hookfin's total outstanding balance as $890.00. Id. Of the total balance, $445.00 was “assessments, interest costs and penalties in arrears, ” and the other $445.00 constituted “collection and lien costs.” Id.

         When Hookfin did not pay the outstanding balance, Hillcrest began foreclosure proceedings against the property. In April of 2012, Hillcrest's new agent, Nevada Association Services, recorded a Notice of Default and Election to Sell. See Notice of Default, ECF No. 96-F. In the six months between Hillcrest's delinquent assessment lien and its notice of default, Hookfin's outstanding balance ballooned to $2, 478.60. Id. Failure to satisfy that balance, the notice stated, could cause Hookfin to lose her home. Id. In addition to recording the notice, Nevada Association Services sent the notice certified mail to Hookfin, MERS, and BNY Mellon. See Certified Mail Log, ECF No. 98-C. Neither Hookfin, nor any other interested party, paid the $2, 478.60 balance, which caused Hillcrest to record a Notice of Foreclosure Sale. ECF No. 96-G. That notice scheduled the foreclosure sale for February 1, 2013, though the actual sale did not occur until May of 2013. See Foreclosure Deed, ECF No. 96-J. The notice also warned that all rights and interests in the property would be sold to the highest bidder unless Hookfin satisfied the outstanding assessment balance of $4, 595.27. Id. at 3.

         Around that time, BNY Mellon's predecessor in interest, Bank of America, retained the law firm of Miles, Bauer, Bergstrom & Winters (“Miles Bauer”) to ascertain and satisfy the bank's portion of the outstanding lien balance. On February 11, 2013, attorney Rock K. Jung contacted Nevada Association Services by letter and requested an accounting of the outstanding lien balance. The letter acknowledged that the superpriority portion of the association's outstanding lien was “arguably senior” to the bank's interest. Id. at 7. However, the bank argued that the superpriority balance only equaled to nine-months' worth of community assessments. With that understanding, Miles Bauer requested an account ledger detailing nine-months of common assessments on the property and agreed to pay that amount “whatever it [was].” Id. Nevada Association Services did not produce the nine-month ledger, leaving Bank of America to calculate the outstanding superpriority balance on its own. The bank did so by referencing a statement of account from a different property in the Hillcrest Association. Borrowing from that ledger, Bank of America calculated the superpriority lien to be $630.00 ($70 per month for nine months). Stmt. of Acct., ECF No. 97-F Ex. 3. It then sent Nevada Association Services a check for that amount. A letter accompanying that check read:

Despite your current refusal to provide HOA payoff ledgers, [Bank of America] still wishes to make a good-faith attempt to fulfill [its] obligations as the 1st lienholder by tendering to NAS an accurate estimate of the Super-Priority Amount. . . Enclosed you will find a cashier's check made out to NEVADA ASSOCIATION SERVICES in the sum of $630.00.
This is a non-negotiable amount and any endorsement of said cashier's check on your part, whether express or implied, will be strictly construed as an unconditional acceptance . . . and express agreement that [the bank's] Super-Priority obligations towards the HOA . . . have now been “paid in full.”

Id. at 13. Hillcrest was undeterred by the bank's offer to pay nine-months' worth of assessments. It returned the check and proceeded to foreclosure. On May 3, 2013, Nevada Association Services sold the property a trustee's sale to the Edward ...

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