Prof-2013-S3 Legal Title Trust IV v. Reo Investment Advisors V LLC, et al, No. 2:2017cv00277 - Document 73 (D. Nev. 2018)

Court Description: ORDER denying 45 Motion for Summary Judgment; ORDER granting 46 Motion for Summary Judgment; ORDER denying 48 Motion for Summary Judgment; ORDER granting 67 Motion for Leave to File Document; Signed by Judge James C. Mahan on 12/6/2018. (Copies have been distributed pursuant to the NEF - JM)
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Prof-2013-S3 Legal Title Trust IV v. Reo Investment Advisors V LLC, et al Doc. 73 1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF NEVADA 6 *** 7 8 PROF-2013-S3 LEGAL TITLE TURST IV, BY U.S. BANK NATIONAL ASSOCIATION, AS LEGAL TITLE TRUSTEE, 9 12 ORDER Plaintiff(s), 10 11 Case No. 2:17-CV-277 JCM (CWH) v. REO INVESTMENT ADVISORS V LLC, et al., Defendant(s). 13 14 15 16 17 18 19 20 21 Presently before the court is defendant El Dorado Neighborhood Second Homeowners Association’s (“El Dorado”) motion for summary judgment. (ECF No. 45). Plaintiff PROF-2013S3 Legal Title Trust IV, by U.S. Bank National Association, as Legal Title Trustee (“U.S. Bank”) filed a response (ECF No. 53), to which El Dorado replied (ECF No. 59). Also before the court is U.S. Bank’s motion for summary judgment. (ECF No. 46). Defendant REO Investment Advisors V LLC (“REO”) and El Dorado filed separate responses (ECF Nos. 47, 54), to which U.S. Bank replied (ECF No. 60). Also before the court is REO’s motion for summary judgment (ECF No. 48). U.S. Bank 22 23 filed a response. (ECF No. 56). REO did not file a reply and the time to do so has passed. Also before the court is REO’s motion for leave to file supplemental points and authorities 24 25 26 27 28 (ECF No. 67). U.S. Bank filed a response (ECF No. 71), to which REO replied (ECF No. 72). I. Facts This action arises from a dispute over real property located at 1829 Ginger Blossom Avenue, North Las Vegas, Nevada 89031 (“the property”). (ECF No. 1). James C. Mahan U.S. District Judge Dockets.Justia.com 1 Lovetta Kanani Seanoa purchased the property on October 1, 2008. (ECF No. 1-2). Seanoa 2 financed the purchase with a loan in the amount of $217,049.00 from Taylor, Bean & Whitaker 3 Mortgage Corp. (“TBW”). (ECF No. 1-3). TBW secured the loan with a deed of trust, which 4 names TBW as the lender, American National Escrow Company as the trustee, and Mortgage 5 Electronic Registration Systems, Inc. (“MERS”) as the beneficiary as nominee for the lender and 6 lender’s successors and assigns. Id. On June 11, 2014, U.S. Bank acquired all beneficial interest 7 in the deed of trust via an assignment, which U.S. Bank recorded with the Clark County recorder’s 8 office. (ECF Nos. 1-6, 46-1). 9 10 On June 24, 2011, El Dorado, through its agent Assessment Management Services (“AMS”), recorded a notice of delinquent assessment lien (“the lien”) against the property for the 11 Seanoa’s failure to pay El Dorado in the amount of $768.65. (ECF No. 1-8). On April 23, 2012, 12 El Dorado recorded a notice of default and election to sell pursuant to the lien, stating that the 13 amount due was $1,687.76 as of April 19, 2012. (ECF No. 1-9). 14 In an attempt to exercise its right of redemption, U.S. Bank’s predecessor in interest 15 requested from El Dorado the superpriority amount of the lien. (ECF No. 46-2). In response, El 16 Dorado provided a payoff ledger of the Seanoa’s total amount due from January 2011 to February 17 2013. Id. The payoff ledger shows an outstanding balance of $2,263.39 but does not state what 18 portion of the balance constitutes the superpriority portion of the lien. Id. The ledger also does 19 not include charges for maintenance and nuisance abatement. Id. The ledger does state, however, 20 that El Dorado’s annual assessment against the property was $120.00 as of January 2011, $105.00 21 as of January 2012, and $105 as of January 2013. Id. 22 U.S. Bank’s predecessor in interest used El Dorado’s ledger to calculate the superpriority 23 amount as $78.75, the sum of nine months of common assessments based on the January 2013 24 assessment. Id. On April 18, 2013, U.S. Bank’s predecessor in interest sent a letter and a check 25 for that amount to El Dorado. Id. The letter explained that the check was the sum of nine months 26 of common assessments and intended to pay off the superpriority portion of the lien. Id. El 27 Dorados rejected the payment without explanation. Id. 28 James C. Mahan U.S. District Judge -2- 1 On August 1, 2013, El Dorado recorded a notice of foreclosure sale against the property. 2 (ECF No. 1-10). On August 29, 2014, El Dorado sold the property in a nonjudicial foreclosure 3 sale to REO Investment advisors IV LLC in exchange for $29,500.00. (ECF No. 1-11). On 4 September 10, 2014, REO Investment advisors IV LLC recorded the deed of foreclosure with the 5 Clark County recorder’s officer. Id. On September 29, 2014, REO Investment Advisors IV LLC 6 transferred the property to REO via quitclaim deed, which REO recorded with the Clark County 7 recorder’s office on October 15, 2014. (ECF No. 1-12). 8 On January 30, 2017, U.S. Bank initiated this action. (ECF No. 1). In the amended 9 complaint, U.S. Bank alleges eight causes of action: (1) quiet title/declaratory relief against all 10 defendants; (2) declaratory relief under the Fifth and Fourteenth Amendments against all 11 defendants; (3) quiet title under the Fifth and Fourteenth Amendments against REO; (4) permanent 12 and preliminary injunction against REO; (5) unjust enrichment against REO; (6) wrongful 13 foreclosure against El Dorado; (7) negligence against El Dorado: and (8) negligence per se against 14 El Dorado. (ECF No. 12). On August 6, 2018, the court dismissed U.S. Bank’s seventh and eighth 15 causes of action. Now, the parties have filed cross-motions for summary judgment, requesting the court to 16 17 resolve whether the foreclosure sale extinguished the deed of trust. (ECF Nos. 45, 46, 48). 18 II. Legal Standard 19 The Federal Rules of Civil Procedure allow summary judgment when the pleadings, 20 depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, 21 22 show that “there is no genuine dispute as to any material fact and the movant is entitled to a judgment as a matter of law.” Fed. R. Civ. P. 56(a). A principal purpose of summary judgment is 23 “to isolate and dispose of factually unsupported claims.” Celotex Corp. v. Catrett, 477 U.S. 317, 24 323–24 (1986). 25 26 27 28 James C. Mahan U.S. District Judge For purposes of summary judgment, disputed factual issues should be construed in favor of the nonmoving party. Lujan v. Nat’l Wildlife Fed., 497 U.S. 871, 888 (1990). However, to withstand summary judgment, the nonmoving party must “set forth specific facts showing that there is a genuine issue for trial.” Id. -3- 1 In determining summary judgment, a court applies a burden-shifting analysis. “When the 2 party moving for summary judgment would bear the burden of proof at trial, it must come forward 3 with evidence which would entitle it to a directed verdict if the evidence went uncontroverted at 4 trial. In such a case, the moving party has the initial burden of establishing the absence of a genuine 5 issue of fact on each issue material to its case.” C.A.R. Transp. Brokerage Co. v. Darden Rests., 6 Inc., 213 F.3d 474, 480 (9th Cir. 2000) (citations omitted). 7 By contrast, when the nonmoving party bears the burden of proving the claim or defense, 8 the moving party can meet its burden in two ways: (1) by presenting evidence to negate an essential 9 element of the nonmoving party’s case; or (2) by demonstrating that the nonmoving party failed 10 to make a showing sufficient to establish an element essential to that party’s case on which that 11 party will bear the burden of proof at trial. See Celotex Corp., 477 U.S. at 323–24. If the moving 12 party fails to meet its initial burden, summary judgment must be denied and the court need not 13 consider the nonmoving party’s evidence. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 159– 14 60 (1970). 15 If the moving party satisfies its initial burden, the burden then shifts to the opposing party 16 to establish that a genuine issue of material fact exists. See Matsushita Elec. Indus. Co. v. Zenith 17 Radio Corp., 475 U.S. 574, 586 (1986). The opposing party need not establish a dispute of material 18 19 20 fact conclusively in its favor. See T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass’n, 809 F.2d 626, 631 (9th Cir. 1987). It is sufficient that “the claimed factual dispute be shown to require a jury or judge to resolve the parties’ differing versions of the truth at trial.” Id. 21 In other words, the nonmoving party cannot avoid summary judgment by relying solely on 22 conclusory allegations that are unsupported by factual data. See Taylor v. List, 880 F.2d 1040, 23 1045 (9th Cir. 1989). Instead, the opposition must go beyond the assertions and allegations of the 24 pleadings and set forth specific facts by producing competent evidence that shows a genuine issue 25 for trial. See Celotex, 477 U.S. at 324. 26 At summary judgment, a court’s function is not to weigh the evidence and determine the 27 truth, but to determine whether a genuine dispute exists for trial. See Anderson v. Liberty Lobby, 28 James C. Mahan U.S. District Judge Inc., 477 U.S. 242, 249 (1986). The evidence of the nonmovant is “to be believed, and all -4- 1 justifiable inferences are to be drawn in his favor.” Id. at 255. But if the evidence of the 2 nonmoving party is merely colorable or is not significantly probative, summary judgment may be 3 granted. See id. at 249–50. 4 III. Discussion 5 As a preliminary matter, the court will grant REO’s motion to file supplemental points and 6 authorities (ECF No. 53) pursuant to Local Rule 7-2(g) as the points and authorities include new 7 8 9 evidence regarding El Dorado’s assessments against the property. The parties have filed cross-motions for summary judgment, disputing whether the foreclosure sale extinguished the deed of trust. (ECF Nos. 45, 46, 48). 10 Under Nevada law, “[a]n action may be brought by any person against another who claims 11 an estate or interest in real property, adverse to the person bringing the action for the purpose of 12 determining such adverse claim.” Nev. Rev. Stat. § 40.010. “A plea to quiet title does not require 13 any particular elements, but each party must plead and prove his or her own claim to the property 14 in question and a plaintiff’s right to relief therefore depends on superiority of title.” Chapman v. 15 Deutsche Bank Nat’l Trust Co., 302 P.3d 1103, 1106 (Nev. 2013) (citations and internal quotation 16 marks omitted). Therefore, a party must show that its claim to the property is superior to all others 17 in order to succeed on a quiet title action. See also Breliant v. Preferred Equities Corp., 918 P.2d 18 19 20 314, 318 (Nev. 1996) (“In a quiet title action, the burden of proof rests with the plaintiff to prove good title in himself.”). Section 116.3116(1) of the Nevada Revised Statutes1 allows an HOA to place a lien on its 21 homeowners’ residences for unpaid assessments and fines. Nev. Rev. Stat. § 116.3116(1). 22 Moreover, NRS 116.3116(2) gives priority to that HOA lien over all other encumbrances with 23 limited exceptions—such as “[a] first security interest on the unit recorded before the date on 24 which the assessment sought to be enforced became delinquent.” 25 116.3116(2)(b). Nev. Rev. Stat. § 26 27 28 James C. Mahan U.S. District Judge 1 The 2015 Legislature revised Chapter 116 substantially. 2015 Nev. Stat., ch. 266. Except where otherwise indicated, the references in this order to statutes codified in NRS Chapter 116 are to the version of the statutes in effect in 2011–13, when the events giving rise to this litigation occurred. -5- 1 The statute then carves out a partial exception to the subparagraph (2)(b) exception for first 2 security interests. See Nev. Rev. Stat. § 116.3116(2). In SFR Investments Pool 1 v. U.S. Bank, the 3 Nevada Supreme Court provided the following explanation: 4 5 6 7 8 9 10 As to first deeds of trust, NRS 116.3116(2) thus splits an HOA lien into two pieces, a superpriority piece and a subpriority piece. The superpriority piece, consisting of the last nine months of unpaid HOA dues and maintenance and nuisance-abatement charges, is “prior to” a first deed of trust. The subpriority piece, consisting of all other HOA fees or assessments, is subordinate to a first deed of trust. 334 P.3d 408, 411 (Nev. 2014) (“SFR Investments”). NRS 116.3116 et seq. (“Chapter 116”) permits an HOA to enforce its superpriority lien with a nonjudicial foreclosure sale. Id. at 415. Thus, “NRS 116.3116(2) provides an HOA a true superpriority lien, proper foreclosure of which will extinguish a first deed of trust.” Id. at 419; see 11 also Nev. Rev. Stat. § 116.31162(1) (providing that “the association may foreclose its lien by sale” 12 upon compliance with the statutory notice and timing rules). 13 14 15 16 17 18 19 NRS 116.31166(1) provides that when an HOA forecloses on a property pursuant to NRS 116.31164, the following recitals in the deed are conclusive proof of the matters recited: (a) Default, the mailing of the notice of delinquent assessment, and the recording of the notice of default and election to sell; (b) The elapsing of the 90 days; and (c) The giving of notice of sale[.] Nev. Rev. Stat. § 116.31166(1)(a)–(c).2 “The ‘conclusive’ recitals concern . . . all statutory prerequisites to a valid HOA lien foreclosure sale.” See Shadow Wood Homeowners Assoc. v. N.Y. Cmty. Bancorp., Inc., 366 P.3d 1105 (Nev. 2016). Nevertheless, courts retain the equitable 20 21 authority to consider quiet title actions even when an HOA’s foreclosure deed contains statutorily conclusive recitals. See id. at 1112. 22 23 2 24 2. Such a deed containing those recitals is conclusive against the unit's former owner, his or her heirs and assigns, and all other persons. The receipt for the purchase money contained in such a deed is sufficient to discharge the purchaser from obligation to see to the proper application of the purchase money. 25 26 27 28 The statute further provides as follows: 3. The sale of a unit pursuant to NRS 116.31162, 116.31163 and 116.31164 vests in the purchaser the title of the unit’s owner without equity or right of redemption. Nev. Rev. Stat. § 116.31166(2)–(3). James C. Mahan U.S. District Judge -6- 1 Here, the parties have provided the recorded notice of delinquent assessment, the recorded 2 notice of default and election to sell, the recorded notice of foreclosure sale, and the recorded 3 trustee’s deed upon sale. See (ECF No. 1-8, 1-9, 1-10, 1-11). Further, the recorded foreclosure 4 deed contains the necessary recitals to establish compliance with NRS 116.31162 through NRS 5 116.31164. (ECF No. 1-11); See id. at 1112. Therefore, pursuant to NRS 116.31166 and the 6 recorded foreclosure deed, the foreclosure sale was valid to the extent that it complied with NRS 7 116.31162 through NRS 116.31164. 8 While NRS 116.3116 accords certain deed recitals conclusive effect, it does not 9 conclusively entitle the buyer at the HOA foreclosure sale to success on a quiet title claim. See 10 Shadow Wood, 366 P.3d at 1112 (rejecting that NRS 116.31166 defeats, as a matter of law, actions 11 to quiet title). Thus, the question remains whether plaintiff has demonstrated sufficient grounds 12 to justify setting aside the foreclosure sale. See id. 13 “When sitting in equity . . . courts must consider the entirety of the circumstances that bear 14 upon the equities. This includes considering the status and actions of all parties involved, including 15 16 whether an innocent party may be harmed by granting the desired relief.” Id. U.S. Bank argues that the foreclosure sale did not extinguish the deed of trust because U.S. 17 Bank’s predecessor in interest tendered the superpriority portion of the lien. (ECF No. 46). The 18 court agrees. 19 Under NRS 116.31166(1), the holder of a first deed of trust may pay off the superpriority 20 portion of an HOA lien to prevent the foreclosure sale from extinguishing the deed of trust. See 21 22 23 Nev. Rev. Stat. § 116.31166(1); see also SFR Investments, 334 P.3d at 414 (“But as a junior lienholder, BOA could have paid off the SHHOA lien to avert loss of its security . . .”). The superpriority portion of the lien consists of “the last nine months of unpaid HOA dues and 24 maintenance and nuisance-abatement charges,” while the subpriority piece consists of “all other 25 SFR Investments, 334 P.3d at 411; Horizons at Seven Hills HOA fees or assessments.” 26 Homeowners Association v. Ikon Holdings, LLC, 373 P.3d 66 (Nev. 2016) (“NRS 116.3116(2) . . 27 . is limited to an amount equal to the common expenses assessments due during the nine months 28 before foreclosure”) (emphasis added). James C. Mahan U.S. District Judge -7- 1 In Bank of America, the Nevada Supreme Court held that a foreclosure sale did not 2 extinguish a first deed of trust when Bank of America, the holder of the deed of trust, used the 3 4 5 HOA’s representations to calculate and tender the sum of nine months of delinquent assessments. Bank of America, N.A. v. SFR Invs. Pool 1, LLC, 427 P.3d 113, 121 (Nev. 2018) (“Bank of America”). Although the superpriority portion of an HOA lien typically includes maintenance and 6 nuisance abatement charges, the court held that “Bank of America tendered the correct amount to 7 satisfy the superpriority portion of the lien . . . [because] the HOA did not indicate that the property 8 9 10 had any charges for maintenance or nuisance abatement.” Id. at 118. The Nevada Supreme Court’s holding in Bank of America controls the court’s analysis in this case. Like Bank of America, where Bank of America relied on the HOA’s representations to 11 calculate nine months of assessments, U.S. Bank’s predecessor relied on El Dorado’ ledger to 12 calculate nine months of assessments. See id. at 118; (ECF No. 46-2). Further, El Dorado, like 13 the HOA in Bank of America, did not indicate that the property had any charges for maintenance 14 or nuisance abatement. See Bank of America, 427 P.3d at 118; (ECF No. 46-2). Thus, when U.S. 15 Bank’s predecessor sent to El Dorado a check for nine months of assessments based on the January 16 2013 annual assessment, it properly tendered the superpriority portion of the lien. Therefore, the 17 nonjudicial foreclosure sale did not extinguish the deed of trust. See id. at 121 (“It follows that 18 after a valid tender of the superpriority portion of an HOA lien, a foreclosure sale . . . cannot 19 extinguish the first deed of trust”). 20 IV. 21 22 23 24 25 26 27 Conclusion Accordingly, IT IS HEREBY ORDERED, ADJUDGED, and DECREED that El Dorado’ motion for summary judgment (ECF No. 45) be, and the same hereby is, DENIED. IT IS FURTHER ORDERED that U.S. Bank’s motion for summary judgment (ECF No. 46) be, and the same hereby is, GRANTED. IT IS FURTHER ORDERED that REO’s motion for summary judgment (ECF No. 48) be, and the same hereby is, DENIED 28 James C. Mahan U.S. District Judge -8- 1 2 IT IS FURTHER ORDERED that REO’s motion for leave to file supplemental points and authorities (ECF No. 67) be, and the same hereby is, GRANTED. 3 The clerk shall enter judgment accordingly and close the case. 4 DATED December 6, 2018. 5 6 __________________________________________ UNITED STATES DISTRICT JUDGE 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 James C. Mahan U.S. District Judge -9-