Deutsche Bank National Trust Company v. SFR Investments Pool 1, LLC et al, No. 2:2017cv02638 - Document 95 (D. Nev. 2020)

Court Description: ORDER granting 77 Motion for Summary Judgment; ORDER granting 78 Motion for Default Judgment; ORDER denying 79 Motion for Summary Judgment; ORDER granting 81 Motion for Summary Judgment; Signed by Judge Gloria M. Navarro on 5/11/2020. (Copies have been distributed pursuant to the NEF - JM)

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Deutsche Bank National Trust Company v. SFR Investments Pool 1, LLC et al Doc. 95 Case 2:17-cv-02638-GMN-EJY Document 95 Filed 05/11/20 Page 1 of 18 1 UNITED STATES DISTRICT COURT 2 DISTRICT OF NEVADA 3 4 5 6 7 8 9 10 11 12 DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee for Residential Asset Securitization Trust 2006-A3CB Mortgage Passthrough Certificates, Series 2006-C, ) ) ) ) ) Plaintiff, ) vs. ) ) SFR INVESTMENTS POOL 1, LLC; ) ALIANTE MASTER ASSOCIATION; ) NEVADA ASSOCIATION SERVICES, INC., ) ) Defendants. ) ) Case No.: 2:17-cv-02638-GMN-GWF ORDER Pending before the Court is the Motion for Summary Judgment, (ECF No. 77), filed by 13 Defendant Aliante Master Association (“HOA”). Plaintiff Deutsche Bank National Trust 14 Company (“Plaintiff”) filed a Response, (ECF No. 85), and HOA filed a Reply, (ECF No. 89). 15 Also pending before the Court is the Motion for Summary Judgment, (ECF No. 81), 16 filed by Defendant SFR Investments Pool 1, LLC (“SFR”). Plaintiff filed a Response, (ECF 17 No. 85), and SFR filed a Reply, (ECF No. 90). 18 Also pending before the Court is Plaintiff’s Motion for Summary Judgment, (ECF No. 19 79). Defendants HOA and SFR each filed Responses, (ECF Nos. 86–87), and Plaintiff filed a 20 Reply, (ECF No. 91). 21 Also pending before the Court is SFR’s Motion for Default Judgment as to Cross-Claim 22 Defendant Norman R. Flemens (“Borrower”), (ECF No. 78). Borrower did not file a response. 23 For the reasons discussed below, the Court GRANTS SFR and HOA’s Motions for 24 Summary Judgement. The Court DENIES Plaintiff’s Motion for Summary Judgment. The 25 Court GRANTS SFR’s Motion for Default Judgment. Page 1 of 18 Dockets.Justia.com Case 2:17-cv-02638-GMN-EJY Document 95 Filed 05/11/20 Page 2 of 18 1 I. BACKGROUND 2 This case arises from the non-judicial foreclosure sale of real property located at lot one 3 hundred thirty-five (135) in block six (6) of Aliante parcel 12A phase 2 as shown in Plat Book 4 119, page 42 of plats in the Clark County Recorder’s Office (the “Property”). (See Deed of 5 Trust (“DOT”), Ex. 2 to Pl.’s Mot. Summ. J. (“MSJ”), ECF No. 80-1). Borrower purchased the 6 Property by way of a loan in the amount of $280,450.00, secured by a DOT recorded on 7 December 27, 2005. (Id.) The DOT identifies Meridias Capital, Inc. (“Meridias”) as the lender 8 and Mortgage Electronic Registration Systems, Inc. (“MERS”) as the nominee beneficiary for 9 Meridias and Meridias’s successors in interest. (Id.). Plaintiff gained a beneficial interest in the 10 DOT through an assignment recorded on November 8, 2018. (Assignment, Ex. 21 to Pl.’s MSJ, 11 ECF No. 80-1). 12 On January 14, 2009, HOA, through its agent Nevada Association Services, Inc. 13 (“NAS”), recorded a notice of lien against the property. (Notice of Lien, Ex. 3 to Pl.’s MSJ, 14 ECF No. 80-1). The notice indicated that Borrower had an outstanding balance of $1,950.00 on 15 the DOT as of January 9, 2009. (Id.). The notice of lien did not purport to include any 16 delinquent assessments or nuisance abatement fees. (See Notice of Lien); (NAS Violations 17 Only Statement, Ex. 4 to Pl.’s MSJ, ECF No. 79-1); (NAS Dep., Ex. 5 to Pl.’s MSJ, ECF No. 18 14:21–15:12, ECF No. 79-1). NAS did not send the notice to MERS, and the notices sent to 19 Meridias and Borrower were returned as undeliverable. (NOD Return Envelopes, Ex. 9 to Pl.’s 20 MSJ, ECF No. 79-1). On September 18, 2009, HOA, through NAS, mailed Borrower a notice 21 of delinquent assessment lien that was not recorded, which noted that Borrower was delinquent 22 on his common assessment fee payments. (See Notice of Delinquent Assessment Lien, Ex. B to 23 SFR’s Resp. to Pl.’s MSJ, ECF No. 87-2). On November 20, 2009, NAS proceeded with 24 foreclosure under the DOT by recording a notice of default and election to sell on behalf of 25 HOA. (See Notice of Default, Ex. 6 to Pl.’s MSJ, ECF No. 80-1). NAS then recorded two Page 2 of 18 Case 2:17-cv-02638-GMN-EJY Document 95 Filed 05/11/20 Page 3 of 18 1 notices of foreclosure sale, first on July 23, 2010 and later on February 20, 2013. (First Notice 2 of Sale, Ex. 10 to Pl.’s MSJ, ECF No. 80-1); (Second Notice of Sale, Ex. 15 to Pl.’s MSJ, ECF 3 No. 80-1). On March 8, 2013, NAS sold the Property for $8,100.00 at the foreclosure sale, and 4 it conveyed the Property to SFR by a foreclosure deed recorded on March 15, 2013. 5 (Foreclosure Deed, Ex. 18 to Pl.’s MSJ, ECF No. 80-1). Plaintiff commenced this action by filing the Complaint on October 11, 2017, primarily 6 7 seeking a declaration that its DOT continues to encumber the Property. (Compl. 19:23–20:2, 8 ECF No. 1). In the alternative, Plaintiff requests either that the sale be set aside or an award of 9 damages. (Id. 20:6–8, 20:21–24). 10 II. LEGAL STANDARD 11 A. Summary Judgment 12 The Federal Rules of Civil Procedure provide for summary adjudication when the 13 pleadings, depositions, answers to interrogatories, and admissions on file, together with the 14 affidavits, if any, show that “there is no genuine dispute as to any material fact and the movant 15 is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). Material facts are those that 16 may affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 17 A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable jury to 18 return a verdict for the nonmoving party. Id. “Summary judgment is inappropriate if 19 reasonable jurors, drawing all inferences in favor of the nonmoving party, could return a verdict 20 in the nonmoving party’s favor.” Diaz v. Eagle Produce Ltd. P’ship, 521 F.3d 1201, 1207 (9th 21 Cir. 2008) (citing United States v. Shumway, 199 F.3d 1093, 1103–04 (9th Cir. 1999)). A 22 principal purpose of summary judgment is “to isolate and dispose of factually unsupported 23 claims.” Celotex Corp. v. Catrett, 477 U.S. 317, 323–24 (1986). 24 25 In determining summary judgment, a court applies a burden-shifting analysis. “When the party moving for summary judgment would bear the burden of proof at trial, it must come Page 3 of 18 Case 2:17-cv-02638-GMN-EJY Document 95 Filed 05/11/20 Page 4 of 18 1 forward with evidence which would entitle it to a directed verdict if the evidence went 2 uncontroverted at trial. In such a case, the moving party has the initial burden of establishing 3 the absence of a genuine issue of fact on each issue material to its case.” C.A.R. Transp. 4 Brokerage Co. v. Darden Rests., Inc., 213 F.3d 474, 480 (9th Cir. 2000) (citations omitted). In 5 contrast, when the nonmoving party bears the burden of proving the claim or defense, the 6 moving party can meet its burden in two ways: (1) by presenting evidence to negate an 7 essential element of the nonmoving party’s case; or (2) by demonstrating that the nonmoving 8 party failed to make a showing sufficient to establish an element essential to that party’s case 9 on which that party will bear the burden of proof at trial. Celotex Corp., 477 U.S. at 323–24. If 10 the moving party fails to meet its initial burden, summary judgment must be denied and the 11 court need not consider the nonmoving party’s evidence. Adickes v. S.H. Kress & Co., 398 U.S. 12 144, 159–60 (1970). 13 If the moving party satisfies its initial burden, the burden then shifts to the opposing 14 party to establish that a genuine issue of material fact exists. Matsushita Elec. Indus. Co. v. 15 Zenith Radio Corp., 475 U.S. 574, 586 (1986). To establish the existence of a factual dispute, 16 the opposing party need not establish a material issue of fact conclusively in its favor. It is 17 sufficient that “the claimed factual dispute be shown to require a jury or judge to resolve the 18 parties’ differing versions of the truth at trial.” T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors 19 Ass’n, 809 F.2d 626, 631 (9th Cir. 1987). In other words, the nonmoving party cannot avoid 20 summary judgment by relying solely on conclusory allegations that are unsupported by factual 21 data. Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 1989). Instead, the opposition must go 22 beyond the assertions and allegations of the pleadings and set forth specific facts by producing 23 competent evidence that shows a genuine issue for trial. Celotex Corp., 477 U.S. at 324. 24 At summary judgment, a court’s function is not to weigh the evidence and determine the 25 truth but to determine whether there is a genuine issue for trial. Anderson, 477 U.S. at 249. The Page 4 of 18 Case 2:17-cv-02638-GMN-EJY Document 95 Filed 05/11/20 Page 5 of 18 1 evidence of the nonmovant is “to be believed, and all justifiable inferences are to be drawn in 2 his favor.” Id. at 255. But if the evidence of the nonmoving party is merely colorable or is not 3 significantly probative, summary judgment may be granted. Id. at 249–50. B. 4 Default Judgment Obtaining a default judgment is a two-step process governed by Rule 55 of the Federal 5 6 Rules of Civil Procedure. Eitel v. McCool, 782 F.2d 1470, 1471 (9th Cir. 1986). First, the 7 moving party must seek an entry of default from the clerk of court. Fed. R. Civ. P. 55(a). Then, 8 after the clerk of court enters default, a party must separately seek entry of default judgment 9 from the court in accordance with Rule 55(b). Upon entry of clerk’s default, the court takes the 10 factual allegations in the complaint as true. In determining whether to grant default judgment, courts are guided by the following 11 12 seven factors: (1) the possibility of prejudice to the plaintiff; (2) the merits of the plaintiff’s 13 substantive claims; (3) the sufficiency of the complaint; (4) the sum of money at stake in the 14 action; (5) the possibility of a dispute concerning material facts; (6) whether the default was 15 due to excusable neglect; and (7) the strong public policy favoring decisions on the merits. 16 Eitel, 782 F.2d at 1471–72. 17 III. 18 DISCUSSION Plaintiff seeks summary judgment on its claims for quiet title and declaratory relief, 19 arguing that HOA’s failure to provide statutorily required notice of foreclosure to Meridias, 20 MERS, and Borrower renders the sale void. (Pl.’s Mot. Summ. J. (“MSJ”) 6:18–11:14, ECF 21 No. 79). Additionally, Plaintiff argues that the notice defects render the sale void by violating 22 Plaintiff’s due process rights. (Id. 11:15–12:10). Plaintiff also argues that the foreclosure sale 23 did not extinguish the DOT because HOA did not validly foreclose on any amounts owed under 24 the superpriority portion of HOA’s lien. (Id. 12:11–13:16). Alternatively, if its DOT did not 25 Page 5 of 18 Case 2:17-cv-02638-GMN-EJY Document 95 Filed 05/11/20 Page 6 of 18 1 survive the sale, Plaintiff argues that the Court should set aside the sale in equity. (Id. 13:17– 2 18:25). 3 SFR argues that the Court should grant summary judgment on SFR’s counterclaim for 4 declaratory relief that the sale extinguished Plaintiff’s DOT because: (1) Plaintiff’s claims are 5 time-barred; (2) Plaintiff had constitutionally sufficient notice of sale; and (3) the foreclosure 6 sale was valid and therefore extinguished the junior DOT. (SFR’s MSJ 8:1–12:23, ECF No. 7 81). 8 9 HOA seeks summary judgment against Plaintiff’s claims, arguing: (1) Plaintiff had constitutionally sufficient notice; (2) Plaintiff’s quiet title claims are foreclosed by the HOA’s 10 CC&Rs; and (3) there was no contract between Plaintiff and HOA that provides Plaintiff an 11 action for either breach of contract or breach of the implied covenant of good faith and fair 12 dealing against HOA. (HOA’s MSJ 5:3–8:11, ECF No. 77). 13 C. Statute of Limitations 14 The Court first addresses SFR’s statute of limitations argument, because, if it is correct 15 that Plaintiff’s claims are time-barred by the three-year limitations period under NRS 11.190 or 16 four-year limitations period under NRS 11.220, the Court need not proceed. The Court, having 17 previously addressed this issue in similar matters, concludes that Plaintiff’s quiet title claim is 18 not time-barred. 19 The Court finds that Plaintiff’s quiet title claim is governed by the five-year limitations 20 period set forth in NRS 11.070, which applies to a “cause of action or defense to an action, 21 founded upon title to real property.” Nev. Rev. Stat. 11.070. A quiet title claim is reciprocal in 22 nature as it “requests a judicial determination of all adverse claims to disputed property.” Del 23 Webb Conservation Holding Corp. v. Tolman, 44 F. Supp. 2d 1105, 1110 (D. Nev. 1999) 24 (citing Clay v. Scheeline Banking & Trust Co., 159 P. 1081, 1082–83 (Nev. 1916)). 25 Page 6 of 18 Case 2:17-cv-02638-GMN-EJY Document 95 Filed 05/11/20 Page 7 of 18 The adverse claims here are between Plaintiff, a lienholder, and SFR, a titleholder. The 1 2 essence of Plaintiff’s requested relief (a declaration as to the viability of the deed of trust) is 3 necessarily a challenge to SFR’s interest. See Clay, 159 P. at 1082 (“[O]ne of the essentials of a 4 good complaint in such an action is that [the plaintiff] must show that the defendants claim an 5 interest in the property adverse to the plaintiffs.”). Indeed, should Plaintiff obtain its requested 6 remedy of invalidating the foreclosure sale, SFR would be divested of its title. Because the 7 Court must adjudicate the competing interests here, including the asserted title interest, the 8 action is founded upon title.1 For claims that arise from the non-judicial foreclosure of real property, the statute of 9 10 limitations begins to accrue at the time of the foreclosure sale. Saticoy Bay LLC Series 2021 11 Gray Eagle Way v. JPMorgan Chase Bank, 388 P.3d 226, 232 (2017); US Bank N.A. v. BDJ 12 Invs., LLC, No. 2-16-cv-00866-GMN-PAL, 2018 U.S. Dist. LEXIS 168657, 2018 WL 13 4705525, at *2 (D. Nev. Sept. 29, 2018); Bank of Am., N.A. v. Antelope Homeowners’ Ass’n, 14 No. 2:16-cv-00449-JCM-PAL, 2017 U.S. Dist. LEXIS 13092, 2017 WL 421652, at *3 (D. Nev. 15 Jan. 30, 2017). Because the Complaint in this action was filed less than five years after the 16 March 8, 2013 foreclosure sale, Plaintiff’s quiet title claim is timely. (See Compl., ECF No. 1) 17 (filed October 11, 2017). 18 // 19 // 20 21 1 22 23 24 25 The Nevada Supreme Court has yet to weigh in on which limitations period applies to a lienholder’s quiet title claim. Consequently, there is an intra-District split as to whether lienholders have four or five years to bring quiet title actions. To the extent there is any ambiguity as to NRS 11.070, the Court finds application of that statute’s longer limitations period aligns with Ninth Circuit’s guidance on conflicting statutes of limitations. See Fed. Deposit Ins. Corp. v. Former Officers & Directors of Metro. Bank, 884 F.2d 1304, 1307 (9th Cir. 1989) (“[W]hen there is a ‘substantial question’ which of two conflicting statutes of limitations to apply, the court should apply the longer.”) (quoting Guam Scottish Rite Bodies v. Flores, 486 F.2d 748, 750 (9th Cir. 1973) (applying longer statute of limitations when a claim had features of both an action in trespass and an action in ejectment)). Page 7 of 18 Case 2:17-cv-02638-GMN-EJY Document 95 Filed 05/11/20 Page 8 of 18 HOA’s Lien Status 1 D. 2 The Court next addresses Plaintiff’s argument that any superpriority portion of HOA’s 3 lien was extinguished because HOA’s recorded notice of lien did not include any superpriority 4 amount, and the foreclosure sale occurred more than three years after any superpriority portion 5 became due. The Court concludes that HOA validly foreclosed on its superpriority lien 6 because Borrower was delinquent on his common assessment fees at the time NAS mailed him 7 the notice of delinquent assessment lien. 8 NRS Chapter 116 establishes a split-lien scheme in favor of HOAs. See NRS 116 et seq. 9 The statute provides that the totality of an HOA’s lien comprises: “any construction penalty 10 that is imposed against the unit’s owner pursuant to NRS 116.310305, [and] any assessment 11 levied against that unit or any fines imposed against the unit’s owner from the time the 12 construction penalty, assessment or fine becomes due.” NRS 116.3116(1). Although a first 13 DOT is generally senior to an HOA’s lien, the portion of an HOA’s lien consisting of 14 maintenance fees, nuisance abatement fees, and common assessment fees “which would have 15 become due in the absence of acceleration during the nine months immediately preceding 16 institution of an action to enforce the lien” are senior to a first DOT. See NRS 116.3116 (2)(b) 17 and (3) (2009). To avail itself of a superpriority lien, an HOA must provide a notice of 18 delinquent assessment lien that, “states the amount of assessments and other sums which are 19 due in accordance with subsection 1 of NRS 116.3116 . . . .” NRS 116.31162(1)(a). The 20 superpriority lien is extinguished by statute unless, “proceedings to enforce the lien are 21 instituted, within 3 years after the full amount of the assessments becomes due.” NRS 22 116.3116(5) (2009); see also Saticoy Bay LLC Series 2021 Gray Eagle Way v. JP Morgan 23 Chase Bank, N.A. (“Gray Eagle”), 388 P.3d 226, 231 (Nev. 2017). Mailing the notice of 24 delinquent assessment lien to the borrower marks the beginning of proceedings to enforce the 25 lien. Gray Eagle, 388 P.3d at 232. Page 8 of 18 Case 2:17-cv-02638-GMN-EJY Document 95 Filed 05/11/20 Page 9 of 18 1 Plaintiff argues that the notice of lien did not include amounts encompassed within the 2 HOA’s superpriority lien because the statement NAS sent with the notice only shows 3 Borrower’s debt for violation fees and related collection costs. (Pl.’s MSJ ¶¶ 4–5, 12:11– 4 13:16); (Violations Only Statement, Ex. 4 to Pl.’s MSJ, ECF No. 79-1). HOA responds that 5 Plaintiff’s argument cherry-picks a favorable ledger, but a ledger provided eleven months after 6 HOA mailed the notice of delinquent assessment lien indicates that there are 17 months of 7 delinquent assessments, and, as a result, there is no dispute of material fact that Borrower was 8 delinquent on his common assessment fees at the time the notice of lien was filed. (HOA’s 9 Resp. to Pl.’s MSJ 6:15–24, ECF No. 86); (Nov. 18, 2009 Ledger, Ex. A. to HOA’s Resp. to 10 Pl.’s MSJ, ECF No. 86-1). SFR also argues that HOA properly commenced foreclosure 11 proceedings on the superpriority amount of its lien when it mailed Borrower a notice of 12 delinquent assessment lien in September of 2009. (SFR’s Resp. to Pl.’s MSJ, 6:13–7:6); (Sept. 13 18, 2009 NAS Letter, Ex. B to SFR’s Resp. to Pl.’s MSJ, Bates No. Deutsche 0189, ECF No. 14 87-2); (see also Oct. 1, 2009 NAS Letter, Ex. B to SFR’s Resp. Pl.’s MSJ, Bates No. Deutsche 15 0283, ECF No. 87-2). 16 Here, the ledger associated with the recorded notice of lien does not indicate any 17 outstanding delinquent assessments. However, that is not sufficient to create a dispute of fact 18 regarding whether HOA validly foreclosed on the superpriority portion of its lien. SFR 19 provides uncontroverted evidence that HOA mailed a notice of delinquent assessments to 20 Borrower that indicated Borrower was delinquent on his common assessment fees. (Sept. 18, 21 2009 NAS Letter, Ex. B to SFR’s Resp., Bates No. Deutsche 0189, ECF No. 87-2); (see also 22 Oct. 1, 2009 NAS Letter, Ex. B to SFR’s Resp., Bates No. Deutsche 0283, ECF No. 87-2). An 23 HOA commences foreclosure proceedings by mailing a notice of delinquent assessments to the 24 unit being foreclosed upon and the unit’s owner; there is no requirement that the notice be 25 recorded. NRS 116.31162(1)(a). The common assessments became due less than three years Page 9 of 18 Case 2:17-cv-02638-GMN-EJY Document 95 Filed 05/11/20 Page 10 of 18 1 before HOA mailed the notice. (See Nov. 18, 2009 Ledger) (indicating that 17 months of 2 common assessments were due by the date of the ledger, and, by implication, 15 months’ worth 3 were due when HOA mailed the notice of delinquent assessment lien). Accordingly, HOA 4 validly foreclosed on its lien. 5 E. NRS Chapter 116 Notice Defect 6 The Court next considers Plaintiff’s allegation that HOA’s sale to SFR is void because 7 HOA did not provide statutorily required notice to MERS, Meridias, and Borrower. The Court 8 concludes that the sale is not void because Plaintiff has not met its burden to show that the 9 notice defect prejudiced a party with an interest in the DOT. 10 Under the Nevada Supreme Court’s recent decision in U.S. Bank v. Resources Group, 11 LLC (“Resources Group II”), an HOA’s non-judicial foreclosure sale is void if: (1) the HOA 12 failed to substantially comply with the notice scheme in NRS Chapter 116; (2) a person entitled 13 to notice under NRS Chapter 116 did not receive actual notice of the sale by other means; and 14 (3) the notice deficiency prejudiced a party who held an interest in the property at the time of 15 sale. See 444 P.3d 442, 447 (Nev. 2019). 16 The Court first addresses HOA’s compliance with NRS Chapter 116’s notice 17 requirements. HOA did not provide statutorily required notices to MERS. The DOT names 18 MERS as its record beneficiary. (DOT, Ex. 2 to Pl.’s MSJ, ECF No. 80-1). Accordingly, as the 19 record beneficiary, MERS was a “person with an interest” in the Property entitled to notice. 20 See NRS §§ 116.31168(1); 107.090(1) and (4); 116.21163 (requiring HOA to send notice to 21 each “person with an interest” in the property); see also U.S. Bank, N.A. v. Renovista Ridge 22 Master Prop. Owners Ass’n, 352 F. Supp. 3d 1034, 1040–41 (D. Nev. 2018); Nationstar 23 Mortg., LLC v. Sahara Sunrise Homeowners Ass’n, No. 2:15-cv-01597-MMD-NJK, 2019 U.S. 24 Dist. LEXIS 42231, 2019 WL 1233705, at *3 (D. Nev. Mar. 14, 2019) (explaining notice to 25 MERS is required when it is the record beneficiary of the DOT). Plaintiff provides undisputed Page 10 of 18 Case 2:17-cv-02638-GMN-EJY Document 95 Filed 05/11/20 Page 11 of 18 1 evidence that NAS, on behalf of HOA, failed to send MERS statutorily required notices. (See 2 10-day Letter, Ex. 8 to Pl’s, MSJ, ECF No. 79-1) (showing that MERS was not on the 10-day 3 letter); (NAS Dep. 27:15–29:11, Ex. 5 to Pl.’s MSJ, ECF No. 79-1) (explaining that NAS sent 4 notices only to those parties included on the 10-day letter). Likewise, there is no indication in 5 the record that MERS had actual notice of foreclosure. Second, with respect to Meridias and Borrower, the Court finds that NAS did not 6 7 substantially comply with NRS Chapter 116 by mailing notices that were returned as 8 undeliverable.2 In the context of NRS 116 foreclosure notices, substantial compliance requires 9 that the party entitled to notice receive actual notice of the sale. See Resources Group II, 444 10 P.3d at 447–48; see also Saticoy Bay v. Nev. Ass’n Servs., 444 P.3d 428, 435 (Nev. 2019) 11 (“Substantial compliance requires that a party (1) have actual knowledge, and (2) not suffer 12 prejudice.”); see, e.g., Bank of N.Y. Mellon v. Terra Bella Owners Ass’n, No. 2:16-cv-00549- 13 APG-NJK, 2019 U.S. Dist. LEXIS 210054, 2019 WL 6529036, at *5 (D. Nev. Dec. 4, 2019). 14 Here, the notices sent to Meridias and Borrower were returned as undeliverable, and there is no 15 evidence they received actual notice of the sale prior to its occurrence. (See Notice Return 16 Envelopes, Exs. 9, 12, 17 to Pl.’s MSJ, ECF Nos. 79-1–79-2). The remaining issue for the Court regarding whether the sale is void to the extent it 17 18 extinguished Plaintiff’s DOT is if a party entitled to notice suffered prejudice as a result of the 19 above-described notice deficiencies. The Court concludes that Plaintiff has failed to meet its 20 burden to establish that any party with an interest in the Property suffered prejudice as a result 21 22 23 24 25 Relatedly, Plaintiff also argues that HOA violated its due process rights by providing inadequate notices. (Pl.’s MSJ 11:15–12:10). In the foreclosure context, the Nevada Supreme Court has held that the notice scheme of NRS Chapter 116 is constitutional and does not violate due process. See SFR Invs. Pool 1, LLC v. Bank of New York Mellon, 422 P.3d 1248, 1253 (Nev. 2018). Accordingly, because the Nevada Supreme Court held that foreclosure under the statutory scheme does not offend due process, the question for the Court is whether HOA’s sale of the Property is void or voidable based on HOA’s incomplete compliance with NRS Chapter 116. Cf. Bank of N.Y. Mellon v. Terra Bella Owners Ass’n, No. 2:16-cv-00549-APG-NJK, 2019 U.S. Dist. LEXIS 210054, 2019 WL 6529036, at *5 (D. Nev. Dec. 4, 2019) (denying as-applied due process challenge because sending defective notices by first class mail in compliance with NRS 116 satisfied due process). 2 Page 11 of 18 Case 2:17-cv-02638-GMN-EJY Document 95 Filed 05/11/20 Page 12 of 18 1 of the notice defect because Plaintiff has provided no evidence that Borrower, Meridias, or 2 MERS would have acted to preserve the DOT if it had received notice. See Resources Group II, 3 444 P.3d at 447 (explaining that prejudice may exist when a party shows that it would have 4 paid off the HOA’s superpriority lien if it had received the NRS Chapter 116 notices). 5 F. Shadow Canyon 6 The Court next considers whether the sale is voidable under Nationstar Mortg., LLC v. 7 Saticoy Bay LLC Series 2227 Shadow Canyon, 405 P.3d 641 (Nev. 2017) (“Shadow Canyon”). 8 A sale is voidable when it “was affected by some element of fraud, unfairness, or oppression.” 9 Shadow Canyon, 405 P.3d at 646 (Nev. 2017). Notably, a voidable sale, in contrast to a void 10 sale, cannot defeat the competing title of a bona fide purchaser for value. Resources Group II, 11 444 P.3d at 448; see also Shadow Wood Homeowners Ass’n v. New York Cmty. Bancorp. Inc., 12 366 P.3d 1105, 1114–16 (Nev. 2016). 13 Here, even if the Court finds that the Property sold for a grossly inadequate price, 14 Plaintiff cannot establish that the sale was affected by fraud, unfairness, or oppression. Plaintiff 15 argues that HOA failing to send notices to MERS or notices that were received by Borrower 16 and HOA satisfy the requisite showing of unfairness. (See Pl.’s MSJ 14:17–16:2). The Nevada 17 Supreme Court has held that as long as notices are mailed to all parties with an interest in the 18 property, the sale should not be set aside in equity even if the notices are not received. 3 See 19 PNC Bank, Nat. Assoc. v. Saticoy Bay LLC Series 9320 Mt. Cash. Ave. UT 103, 395 P.3d 511 20 (Table), 2017 Nev. Unpub. LEXIS 395, 2017 WL 2334492 (Nev. May 25, 2017) (unpublished) 21 (“Here, we disagree that appellant has identified an element of fraud, unfairness, or oppression. 22 Although appellant contends that unfairness exists because its predecessor did not receive the 23 24 25 3 Plaintiff, citing Diakonos Holdings, LLC v. Nationstar Mortg., LLC, 443 P.3d 1126 (Table), 2019 Nev. Unpub. LEXIS 779, 2019 WL 3034856 (Nev. July 10, 2019) (unpublished), argues that HOA had a duty of reasonable inquiry to ensure that the notices were being delivered. The Court finds that Plaintiff’s contention is unsupported. Rather, the Nevada Supreme Court recognized a narrow duty of reasonable inquiry to locate a DOT borrower’s successor in interest when the HOA knew the original borrower was deceased. Id. at *1. Page 12 of 18 Case 2:17-cv-02638-GMN-EJY Document 95 Filed 05/11/20 Page 13 of 18 1 notice of sale, the pertinent statutes require only that the notice be mailed, not received.”); see 2 also RLP-Ampus Place, LLC v. U.S. Bank, N.A. (“RLP-Ampus”), 408 P.3d 557 (Table), 2017 3 Nev. Unpub. LEXIS 1174, 2017 WL 6597148 (Nev. Dec. 22, 2017) (unpublished) (setting 4 aside sale because notices were neither mailed to the bank nor received at the address of the 5 property). Plaintiff has not established that HOA’s failure to send notice to MERS constitutes 6 unfairness effecting the sale by resulting in, for example, chilled bidding. See Bank of N.Y. 7 Mellon v. Pomeroy, No. 2:17-cv-00939-RFB-NJK, 2019 U.S. Dist. LEXIS 54981, 2019 WL 8 1429612, at *5 n.6 (Mar. 30, 2019) (“The Court also rejects Plaintiff’s argument that mere 9 failure to send a notice to MERS, even if was [sic] a beneficiary required to receive notice, 10 would somehow render the sale void or voidable as a matter of law. Plaintiff has cited to no 11 Nevada caselaw interpreting NRS Chapter 116 to have such a strict requirement or harsh 12 penalty as it relates to notice.”); cf. RLP-Ampus, 2017 WL 6597148, at *1 (explaining that a 13 sale may be voidable if notices are not sent to the borrower and lender because they are the 14 parties most motivated to stop foreclosure); see also Mortg. Elec. Reg. Sys. v. Neb. Dep’t of 15 Banking & Fin., 704 N.W.2d 784, 785 (Neb. 2005) (explaining MERS’s role in the mortgage 16 services industry). Accordingly, Plaintiff’s allegations of unfairness do not support setting 17 aside the sale in equity. Plaintiff’s Contract Claims against HOA 18 G. 19 HOA requests summary judgment on Plaintiff’s breach of contract claim arguing the 20 claim is not actionable because HOA’s CC&Rs do not constitute contractual provisions. 21 (HOA’s MSJ 6:6–23, 7:5–28, ECF No. 77). HOA continues that even if the Court were to 22 construe its CC&Rs as a valid contract, the CC&Rs do not contain any language providing that 23 lenders are intended beneficiaries. (Id. 6:24–7:4). Plaintiff counters that it is a third-party 24 beneficiary under HOA’s CC&Rs because the CC&Rs evince an intent to benefit mortgage 25 Page 13 of 18 Case 2:17-cv-02638-GMN-EJY Document 95 Filed 05/11/20 Page 14 of 18 1 lenders. (Pl.’s Resp. to HOA’s MSJ 16:15–18:5, ECF No. 85). Plaintiff asserts that the 2 CC&R’s notice provision shows HOA’s intent to benefit lenders’ assignees. (Id. 17:19–22). 3 In SFR Invs. Pool 1, LLC v. U.S. Bank, N.A., 334 P.3d 408 (Nev. 2014) (superseded in 4 part on other grounds), the Nevada Supreme Court expressly held that Chapter 116’s 5 “provisions may not be varied by agreement, and rights conferred by it may not be waived . . . 6 [e]xcept as expressly provided” in Chapter 116. See id. at 419; see also RLP-Vervain Court, 7 LLC v. Wells Fargo, No. 65255, 2014 Nev. Unpub. Lexis 2045, 2014 WL 6889625, at *1 (Nev. 8 Dec. 5, 2014) (unpublished). Because “[n]othing in [NRS] 116.3116 expressly provides for a 9 waiver of the HOA’s right to a priority position for the HOA’s super priority lien,” a mortgage 10 protection clause does not impact NRS 116.3116(2)’s application to cases concerning a 11 homeowners association’s non-judicial foreclosure. SFR Invs. Pool 1, 334 P.3d at 419. 12 Here, Plaintiff premises its breach of contract and implied covenant of good faith claims 13 on language in HOA’s CC&Rs stating that a foreclosure sale would not extinguish a first 14 position Deed of Trust and that title to the Property is sold subject to that Deed of Trust. (Pl.’s 15 Resp. to HOA’s MSJ 16:17–19:13, ECF No. 85). It further asserts it is entitled to raise its 16 contract claims as a third-party beneficiary of the CC&Rs. (Id.). 17 In light of the Nevada Supreme Court’s pronouncements that Chapter 116’s provisions 18 are nonwaivable, courts in this District have held that claims for breach of contract may not 19 arise from mortgagee protection clauses in an HOA’s CC&Rs. See Bank of Am., N.A. v. 20 Operture, Inc., No. 2:16-cv-01692-APG-GWF, 2018 U.S. Dist. LEXIS 111446, 2018 WL 21 3242679, at *5–6 (D. Nev. July 2, 2018) (dismissing plaintiff’s claims for misrepresentation 22 and breach of contract on the basis that “an HOA cannot waive its right to a superpriority 23 lien.”); JPMorgan Chase Bank, N.A. v. SFR Invs. Pool 1 LLC, No. 2:16-cv-2110-JCM-VCF, 24 2018 U.S. Dist. LEXIS 31106, 2018 WL 1077280, at *6 (D. Nev. Feb. 26, 2018) (rejecting 25 plaintiff’s claim centered upon “misrepresentations contained in the CC&Rs” and noting that Page 14 of 18 Case 2:17-cv-02638-GMN-EJY Document 95 Filed 05/11/20 Page 15 of 18 1 “[l]anguage in the CC&Rs has no impact on the superpriority lien rights granted by NRS 116.”) 2 (citing SFR Invs. Pool 1, LLC, 224 P.3d at 418–19); Christiana Trust v. Hollywood Ranch 3 Homeowners Ass’n, No. 2:17-cv-2441-JCM-NJK, 2018 U.S. Dist. LEXIS 161770, 2018 WL 4 4550393, at *5 (D. Nev. Sept. 21, 2018) (finding that the “Nevada Supreme Court has held that 5 NRS 116.3116 defeats” plaintiff’s breach of contract claim premised upon a “breach of HOA’s 6 CC&Rs.”). Accordingly, the Court finds that Plaintiff's breach of contract and breach of 7 implied covenant of good faith and fair dealing4 claims fail as a matter of law. 8 H. Default 9 SFR moves for default judgment against Borrower, requesting declaratory relief with 10 respect to its crossclaims. SFR has initiated the two-step process required under Rule 55 by 11 moving for clerk’s entry of default against Borrower, which the Clerk subsequently entered. 12 (See Mot. Clerk’s Entry Default and Clerk’s Default, ECF Nos. 32, 34). In accordance with 13 Rule 55(b), SFR brings the present Motion. (See Mot. Default J., ECF No. 78). 14 Upon reviewing the documents and pleadings on file in this matter, the Court finds that 15 the Eitel factors support entry of default judgment in favor of SFR and against Borrower. The 16 first Eitel factor weighs in favor of default judgment. A defendant’s failure to respond or 17 otherwise appear in a case “prejudices a plaintiff’s ability to pursue its claims on the merits,” 18 and therefore satisfies the first factor. See, e.g., Nationstar Mortg. LLC v. Operture, Inc., No. 19 2:17-cv-03056-GMN-PAL, 2019 U.S. Dist. LEXIS 33632, 2019 WL 1027990, at *2 (D. Nev. 20 Mar. 4, 2019); ME2 Prods., 2018 U.S. Dist. LEXIS 61961, 2018 WL 1763514, at *1; see also 21 PepsiCo, Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal 2002) (“If Plaintiffs’ 22 23 24 25 4 To state a claim for breach of the implied covenant of good faith and fair dealing, Plaintiff must show: (1) the existence of a contract between the parties; (2) that the defendant breached its duty of good faith and fair dealing by acting in a manner unfaithful to the purpose of the contract; and (3) that the plaintiff's justified expectations under the contract were thereby denied. Perry v. Jordan, 111 Nev. 943, 900 P.2d 335, 338 (Nev. 1995). Here, because the Court concludes there is no contract between HOA and Plaintiff, Plaintiff cannot satisfy the first element of the claim. See, e.g., U.S. Bank Trust, N.A. v. Fodor Family Trust, No. 2:18-cv-00077-GMN-GWN, 2019 WL 1446962, at *4 (D. Nev. Mar. 31, 2019). Page 15 of 18 Case 2:17-cv-02638-GMN-EJY Document 95 Filed 05/11/20 Page 16 of 18 1 motion for default judgment is not granted, Plaintiffs will likely be without other recourse for 2 recovery.”). 3 Regarding the second and third Eitel factors, the Court finds SFR’s crossclaims for quiet 4 title, which request declaratory relief, are sufficiently pleaded and meritorious as to Borrower. 5 “A plea to quiet title does not require any particular elements, but ‘each party must plead and 6 prove his or her own claim to the property in question’ and a ‘plaintiff’s right to relief therefore 7 depends on superiority of title.’” Chapman v. Deutsche Bank Nat’l Tr. Co., 129 Nev. 314, 302 8 P.3d 1103, 1106 (Nev. 2013) (quoting Yokeno v. Mafnas, 973 F.2d 803, 808 (9th Cir. 1992)). 9 SFR alleges that to the extent Borrower purports to claim an interest in the Property, 10 SFR’s purchase of the same extinguished Borrower’s interests by operation of NRS Chapter 11 116. (See SFR’s Answer 16:15–17:6, ECF No. 38). SFR’s claim for declaratory relief is 12 sufficiently meritorious because SFR has introduced evidence that it purchased the Property at 13 the foreclosure sale after HOA validly foreclosed on the superpriority portion of its lien. (Chris 14 Hardin Aff. ¶¶ 5–8, Ex. 1 to Mot. Default J., ECF No. 78-1); (NRS Chapter 116 Notices, Ex. 1- 15 B–1-D to Mot. Default J., ECF Nos. 78-3–78–5); (Foreclosure Deed, Ex. 1-E to Mot. Default 16 J., ECF No. 78-6). Additionally, there is no dispute regarding Plaintiff’s failure to take any 17 steps to preserve its DOT. (See Pl.’s MSJ 6:19–18:19). Accordingly, SFR has shown that it 18 would likely be meritorious against any attempt by Borrower to assert title to the Property. 19 The fourth factor weighs in favor of default judgment because SFR seeks only 20 declaratory relief and no monetary damages against Borrower. (SFR’s Answer 16:15–17:6). 21 The fifth Eitel factor, which concerns the possibility of dispute regarding material facts, favors 22 SFR. Courts have recognized that, “[o]nce the clerk enters a default, the well-pleaded factual 23 allegations of the [moving party’s] complaint are taken as true, except for those allegations 24 relating to damages.” ME2 Prods., 2018 U.S. Dist. LEXIS 61961, 2018 WL 1763514, at *2 25 (quoting O’Brien v. United States, No. 2:07-cv-00986-GMN-GWF, 2010 U.S. Dist. LEXIS Page 16 of 18 Case 2:17-cv-02638-GMN-EJY Document 95 Filed 05/11/20 Page 17 of 18 1 101941, 2010 WL 3636171, at *4 (D. Nev. Sept. 9, 2010)). Taking SFR’s Cross-Complaint’s 2 allegations as true, Borrower’s interest in the Property was extinguished upon SFR’s purchase 3 at the foreclosure sale. (SFR’s Answer 13:1–17:6). With respect to the sixth Eitel factor, the Court finds that Borrower’s failure to appear 4 5 was not the result of excusable neglect. Borrower was served on September 23, 2018, and his 6 answer was due on October 14, 2018. (See Summons Returned Executed, ECF No. 48). The 7 Clerk of Court entered default against Borrower on October 18, 2018. (See Clerk’s Default, 8 ECF No. 51). SFR filed its present Motion on June 14, 2019. (See Mot. Default J., ECF No. 9 78). Borrower’s failure to appear or otherwise file anything with respect to this action during 10 the time period counsels against finding excusable neglect. ME2 Prods., 2018 U.S. Dist. 11 LEXIS 61961, 2018 WL 1763514, at *3; O’Brien, 2010 U.S. Dist. LEXIS 101941, 2010 WL 12 3636171, at *6. 13 The seventh and final Eitel factor concerns public policy considerations. While public 14 policy generally favors disposition on the merits, the Court concludes that default judgment is 15 appropriate in light of the other Eitel factors. 16 // 17 // 18 // 19 // 20 // 21 // 22 // 23 // 24 // 25 // Page 17 of 18 Case 2:17-cv-02638-GMN-EJY Document 95 Filed 05/11/20 Page 18 of 18 1 2 3 4 5 6 7 8 9 IV. CONCLUSION IT IS HEREBY ORDERED that Plaintiff’s Motion for Summary Judgment, (ECF No. 79), is DENIED. IT IS FURTHER ORDERED that SFR’s Motion for Summary Judgment, (ECF No. 81), is GRANTED. IT IS FURTHER ORDERED that HOA’s Motion for Summary Judgment, (ECF No. 77), is GRANTED. IT IS FURTHER ORDERED that SFR’s Motion for Default Judgment, (ECF No. 78), is GRANTED. 10 The Clerk of Court shall close the case and enter judgment accordingly. 11 11 day of May, 2020. DATED this _____ 12 13 14 ___________________________________ Gloria M. Navarro, District Judge United States District Court 15 16 17 18 19 20 21 22 23 24 25 Page 18 of 18

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