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Appellant obtained a home loan from Countywide Home Loans. The promissory note was secured by a deed of trust naming Countrywide as the lender and Mortgage Electronic Registration Systems (MERS) as beneficiary of the deed of trust. MERS assigned its interest in the deed of trust to HSBC Bank. Bank of America later acquired Countrywide and its assets, including Appellant's promissory note. After Appellant defaulted on the loan, Appellant participated in Nevada's Foreclosure Mediation Program (FMP). BAC Home Loans Servicing, as a representative of Bank of America, appeared at the mediation. After the mediation, Appellant filed a petition for judicial review, which the district court denied. Appellant appealed, arguing that Bank of America lacked authority to negotiate a loan modification at the mediation because the note and deed of trust were assigned to two separate entities. The Supreme Court reversed the district court's denial of Appellant's petition for judicial review and refusal to impose sanctions, holding that because Bank of America was not the deed of trust beneficiary at the time of the FMP mediation, Bank of America failed to satisfy Nev. Rev. Stat. 107.086(4)'s attendance and participation requirement. Remanded.Receive FREE Daily Opinion Summaries by Email
129 Nev., Advance Opinion 40
IN THE SUPREME COURT OF THE STATE OF NEVADA
BANK OF AMERICA,
JUN 0 2013
Appeal from a district court order denyiri
a petition for
judicial review in a Foreclosure Mediation Program matter.
Judicial District Court, Clark County; Donald M. Mosley, Judge.
Reversed and remanded with instructions.
Law Office of Jacob L. Hafter & Associates and Jacob L. Hafter and
Michael Naethe, Las Vegas,
Akerman Senterfitt, LLP, and Ariel E. Stern and Heidi Parry Stern, Las
BEFORE GIBBONS, DOUGLAS and SAITTA, JJ.
By the Court, DOUGLAS, J.:
In Nevada, when the deed of trust to real property and the
promissory note are held by two different entities and not reunified before
mediation in the Foreclosure Mediation Program, the note holder's
attendance at the mediation on its own behalf is insufficient to meet the
statutory requirement that the deed of trust beneficiary attend and
participate in good faith. Here, when the mediation occurred, Bank of
America was the holder of the note, but it was not the beneficiary of the
deed of trust because the note and deed of trust were intentionally
separated at the inception of the loan and were not reunified. The district
court therefore erred when it determined that Bank of America had the
authority to mediate and when it denied Marcia Bergenfield's petition for
judicial review. Thus, we reverse the district court's judgment and
remand this matter to the district court for further proceedings.
FACTS AND PROCEDURAL HISTORY
Appellant Marcia Bergenfield obtained a home loan from
Countrywide Home Loans, Inc., and executed a promissory note in
Countrywide's favor. The note was secured by a deed of trust naming
Countrywide as the lender and Mortgage Electronic Registration Systems,
Inc. (NIERS), as beneficiary of the deed of trust. The deed of trust
specifically stated that MERS had the authority to transfer the deed of
trust. MERS subsequently assigned its interest in the deed of trust to
HSBC Bank USA. The assignment stated that it carried the deed of trust
along with the underlying note. Meanwhile, Countrywide endorsed the
promissory note in blank, meaning that the holder of the note could
demonstrate entitlement to payment through possession of the note.
Respondent Bank of America later acquired Countrywide and its assets,
including Bergenfield's promissory note.
Bergenfield defaulted on the loan and elected to participate in
Nevada's Foreclosure Mediation Program (FMP). A mediation scheduling
notice was issued that named Bank of America as the deed of trust
beneficiary and ReconTrust Co. as the trustee. Before the mediation,
Bank of America provided the mediator with certified copies of the note,
the deed of trust, and the assignments of the deed of trust.
At the mediation, BAC Home Loans Servicing, LP, appeared
through counsel, purporting to represent Bank of America and indicating
that it was authorized to modify the loan. HSBC did not attend the
mediation and did not send a representative. No agreement was reached.
The mediator's statement indicated that BAC failed to bring short sale
estimates and that Bergenfield failed to provide updated financial
information. The report did not indicate that any party lacked authority
to negotiate or failed to attend the mediation. Bergenfield then filed a
petition for judicial review, which the district court denied after
concluding that the parties had addressed the document production issues
to the district court's satisfaction, and that BAC, as Bank of America's
representative, had authority to negotiate a loan modification and
participated in good faith. This appeal followed.
In this appeal, we address whether a party who purports to
hold a promissory note, but who is not the deed of trust beneficiary of
record, may participate in an FMP mediation and obtain an FMP
certificate permitting it to go forward with foreclosure proceedings.
Bergenfield argues that Bank of America lacked authority to negotiate a
loan modification at the mediation because the documents provided at the
mediation demonstrated that the note and the deed of trust had been
assigned to two separate entities and remained split at the time of the
mediation. Bank of America contends that it is the lender and holder of
the note and that the assignment of the deed of trust to HSBC did not
disturb Bank of America's interest in the loan and its authority to enforce
Nevada law permits the severance and independent transfer
of deeds of trusts and promissory notes without impairing the right to
ultimately foreclose. Edelstein v. Bank of N.Y Mellon,
128 Nev. „
286 P.3d 249, 258-60 (2012). Thus, it is possible for Bank of America to
remain the holder of the note while HSBC is the deed of trust beneficiary.
But in order to nonjudicially foreclose a deed of trust of an owner-occupied
residence, the party seeking foreclosure must demonstrate that it is both
"the current beneficiary of the deed of trust and the current holder of the
promissory note." Id. at , 286 P.3d at 255; see NRS 107.080.
This requirement stems from the fact that a deed of trust is a
lien on the property to secure the debt and the beneficiary of the deed
alone does not have a right to repayment on the loan. Edelstein, 128 Nev.
at , 286 P.3d at 254. Rather, it is the holder of the note that is entitled
to repayment. Id. Therefore, only when the note and deed of trust are
held by the same party is foreclosure proper under NRS Chapter 107.
Leyva v. Nat'l Default Servicing Corp., 127 Nev. , , 255 P.3d 1275,
1279 (2011). To that end, NRS 107.086(4) mandates that a deed of trust
beneficiary must, among other things, attend the mediation itself or
through a representative who has authority to modify the loan or has
access at all times to a person with such authority.
Leyva, 127 Nev. at
, 255 P.3d at 1278. If the deed of trust beneficiary fails to attend the
mediation, the FMP certificate must not issue.
Holt v. Reg'l Tr. Servs.
Corp., 127 Nev. „ 266 P.3d 602, 606-07 (2011).
NRS 107.086(4)'s language requiring the beneficiary of the
deed of trust's attendance clearly and unambiguously precludes the holder
of the note from attending and participating in an FMP mediation on its
own behalf, when it is not also the beneficiary of the deed of trust.
Webb v. Shull, 128 Nev. „ 270 P.3d 1266, 1268 (2012) (holding that
a statute's words will be given their plain meaning). Thus, when a deed of
trust and promissory note have been severed, whether at the inception of
the loan or by subsequent assignment, the instruments must be reunified
to establish proper authority to participate in the FMP. See Edelstein, 128
Nev. at , 286 P.3d at 260-61. That did not happen here.
At the underlying mediation, the recorded beneficiary of the
deed of trust, HSBC, did not attend. Accepting Bank of America's
assertion that it is the holder of the note and consequently had authority
to negotiate the loan, it nevertheless was not the beneficiary of the deed of
trust, and therefore, failed to demonstrate its authority to nonjudicially
foreclose and to participate in the FMP mediation. Although the district
court found that Bank of America had authority to negotiate the loan, that
finding does not overcome the fact that Bank of America was not the
beneficiary of the deed of trust at the time of mediation, based on the
recorded assignment from MERS to HSBC.
Id. at , 286 P.3d at 260
(recognizing that on appeal this court gives deference to the district court's
factual findings and reviews its legal determinations anew). In this
instance, no FMP certificate could validly issue, and sanctions were
mandated. 1 Leyva, 127 Nev. at , 255 P.3d at 1281; see Holt, 127 Nev. at
266 P.3d at 607.
107.086(5) authorizes sanctions against the beneficiary of the
deed of trust or its representative. We conclude that because Bank of
continued on next page . . .
Because Bank of America was not the deed of trust beneficiary
at the time of the FMP mediation, we conclude that it failed to satisfy NRS
107.086(4)'s attendance and participation requirement. Consequently, the
district court erred when it denied Bergenfield's petition for judicial
review and when it declined to impose sanctions. We therefore reverse the
judgment of the district court and remand this matter to the district court
with instructions that the court analyze the factors set forth in Pasillas v.
HSBC Bank USA,
127 Nev. „ 255 P.3d 1281, 1287 (2011), to
determine appropriate sanctions against Bank of America. 2
• . . continued
America held itself out as the beneficiary of the deed of trust, it is the
proper entity against whom sanctions should issue.
Because we reverse on this basis, we do not address Bergenfield's
argument that Bank of America's response to her petition for judicial
review wrongfully revealed confidential information.